On behalf of the whole management team here at Thermo Fisher, I want to welcome everyone to our 2016 Analyst Meeting. We're always excited to be here in New York and this year is certainly no exception. I just want to quickly run through the program for the day, go through a couple of housekeeping items and then we'll, we'll get started. So, first, let me just start with the agenda. So, we're going to have presentations that, that I hope you'll enjoy that are more focused on the long term.
No longer the quarterly earnings calls, this is our opportunity to really think a little further down the road. So, we're going to Mark Kazdin, CEO, CFO and then several of our key business leaders will give you some examples in areas that will show why we're so excited about the opportunities ahead. We're going to take a Short break in the middle of the program right after Tom Lewald's presentation, and then we'll come back. We'll go through a few more presentations. And then at the end, After Mark Stephenson presents, Mark will come up and we'll open it up for Q and A.
When we get to the Q and A portion, I ask and answers. So, at that point in time, please state your name and your organization, for the webcast. Also if you, have cell phones, other Devices, please ask that, that you mute those. Before we go to Felicia, I'm told by our legal counsel. Various remarks we make in these presentations about the company's future expectations, plans and prospects constitute forward looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated statements, those discussed in Risk Factors, Securities and Exchange Commission and available in the Investors section of our website under the heading SEC filings. While we may elect to update forward looking statements at some point in the future, we specifically disclaim any obligation to do so even if our estimates change. And therefore, you should not rely on these forward looking statements as running our views as of any date. During the presentations today, we'll including adjusted operating margin, adjusted ROIC and free cash flow. These non GAAP financial measures of our results of Thermo Fisher's results of operations prepared in accordance with non GAAP financial measures for historic basis and non GAAP measures to the most directly comparable GAAP measures is available in the appendix to today's presentations.
So with that, it's my pleasure to introduce our President and CEO, Mark Casper.
Thank you, Ken. Good morning. Nice to see so many familiar faces here in New York City as well as some new ones as well. I'd like to start by thanking our Board of Directors for joining us today as they have in years past and recognize them. Jim Manzi, our Chairman Nelson Che, Martin Harris, Tyler Jacks, Judy Lewent, Tom Lynch, Bill Perrette, Scott Sperling and Elaine Yullian.
We also have several members of our management team here, in addition to those who are presenting. In terms of quick comment on the format a little bit, Previously, we've taken a deep dive into our 4 segments. What we thought this year is that we'd give you a little bit more color around how we drive our growth themes and the integrated nature of our strategy across the business. You're going to hear about how we leverage our total capabilities from Commercial, innovation and emerging markets perspective, and you'll hear that from Tom Lowald, Alan Sachs and Syed Jaffray. Given that we're in year 3 of the integration of Life Technologies, we thought we would wrap up today with Mark Stephenson talking about how Thermo Fisher's scale and depth of capabilities has made his business stronger and how exciting the next chapter looks.
I always look forward to today in giving you an update on the terrific progress that we've made, but most excited about what lies ahead. After finishing a great 2015, we had an outstanding start to the year. We detailed that in our April earnings call. We're feeling good about where we are in our evolution as a company. We've been successfully executing our growth strategy for quite a number of years, and that's setting us up for an exciting future.
I'll kick off the morning with a quick overview of some of the past achievements and then focus on what we aspire to achieve going forward. Before I do that, I thought my presentation with the takeaways on this day, which really summarizes them in 3 key areas. The first of which is our growth strategy is working and it really drives outstanding financial performance. The key aspects of our growth strategy is related to our exciting pipeline of innovative new technologies, our unmatched presence in emerging markets and our unique customer value proposition. That growth strategy delivers a very attractive financial Outlook for the company and when you look at our long term financial model, we are looking at 4% to 6% organic growth over the period from now to 2019, which is higher than The 4% to 5% we articulated last year driven by the fact that our Life Science Solutions segment is now performing really around the company average.
And therefore, we're back to what was our long term historical organic growth targets of 4% to 6%. So that's obviously very encouraging. That strong top line growth will deliver 12% to 15% growth in adjusted EPS, while continually expanding our returns on invested capital. The third point in terms of the day and our outlook is that we have a very successful track record of effective capital deployment, and we'll outline why we see so many opportunities ahead to continue to create shareholder value by putting our strong cash flow And healthy balance sheet to work and talking about our industry opportunities as well as how we'll think about return of capital as well. The company is all about creating value.
We do that for our customers, our colleagues and our shareholders. And I think the points on this slide really outline the roadmap on how we'll do that. This month, 10 years ago, we announced the merger that created Thermo Fisher Scientific. The 10 years has gone quickly and I thought I'd spend a couple of minutes Just talking about how we built the Capabilities Day, before when you look at it's really been based On consistent execution day in and day out over a long period of time. It starts with innovation and bringing out High impact, highly relevant products for our customers.
You can think about that decade since the creation of the company launching of the Orbitrap, As one example, our big push into portable analytical instruments around building market share in chromatography Gen Sequent. From an emerging market perspective, it was a much smaller percentage of our company a decade ago. And through using our scale, We've built out leading presences around the higher growth regions of the world. And our strategy in China, as you know, Has really paid significant dividends for the company and positions us for continued growth. Highlight here some of the notable M and A we've done over the last decade as we've strengthened our industry leadership over that period of time.
And while there's a lot of great things to look in the past, The most important point is it builds a solid foundation for us to leverage into the future. When you look at that strategy and the fact that our 50,000 colleagues around the world come to work every day focused on our customer success, You're able to deliver incredibly strong financial performance. And it's really about alignment and execution. And because of that, You can see generated adjusted EPS growth averaging 16% over that decade. And that's been in a period of variable Economic conditions, so really a strong and consistent track record.
If you overlay The share price performance over that period of time, we have far outpaced the S and P 500 in terms of the returns that we've generated. And from our perspective, that long and consistent track record is unique. This and the significant opportunities ahead, I think give you a sense from myself and the culture, so confident about how we got shot of how we think about Thermo Fisher Scientific. By far, the industry leader, 50,000 colleagues working with our customers, really a very strong commercial reach around the world. And we bring a set of capabilities unmatched depth in terms of innovative technologies, deep applications, expertise and known by our customers as the premier laboratory productivity partner.
Our customers know our brands And these are our 5 premier brands that you can find in labs all over the world, Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific and Unity Lab Services. Our company's mission is to enable our customers to make the world healthier, cleaner, safer, And that inspires our colleagues to bring its bring our best every day because of the importance of the work that our customers are doing. For me, I've been in the industry a little over 20 years. It's an incredibly exciting place to be. When I think about the market that we're in dollars, it's growing 3 to 5.
And what we've seen, there are a number of really positive short term catalysts In our industry, whether it's the fact that we're in a good NIH funding cycle in the United States, this fiscal year is the strongest growth we've seen since the recession. At the same point, in China, which is the 2nd largest of our markets, the new modern market and for our industry, the key of their 5 year plan and why we're so encouraged by what the societal priorities are in China. When you take those two factors, plus the things going on around in the world, whether it is societal threats or the great momentum in the biopharma market that really does put us in a very exciting part of the short term outlook for the life science But it's not just a short term phenomenon, the long term potential here continue to be combination of substantial demand. In fact, deal with the fact of the burden of health care costs from an aging population. The success in biologics and vaccines drive Demand and the fact that more drugs are getting approved is very encouraging from a long term perspective.
And then the growth in emerging markets Creates a bright outlook for the environmental and applied markets as well. So it's a great industry. Because of our new competition in the industry, we can work at delivering at least 1% growth faster than the rate of market, which is consistent with the 4% to 6% organic outlook that we have through 2019. So looking ahead, 1st with the longest term view, what are we trying to accomplish as a company? And we look at that through the lens of our 3 stakeholders, right, our customers, our colleagues and our shareholders.
From a customer perspective, The way we work with it is, they are doing incredibly important work, preventing disease, Diagnosing patients, ensuring that we are breathing clean air, food safety, these are some of their priorities. And what we do is make sure that We're bringing out the breakthroughs to enable real improvements in society. And at the same point, that we continue to be the most relevant company in the So we can gain market share and we use our scale and depth of capabilities to create a unique competitive position. From a colleague perspective, it's a cool place to work. And our job is as students colleagues, right, to really ensure that we're enabling our customer And having that opportunity and the privilege of working with our 50,000 colleagues, you really get a sense of how well positioned we are as a team.
Along the way, we'll become recognized as one of the world's most admired companies, we certainly mean and that's one of them. And from a shareholder perspective, we want to continue to generate very substantial shareholder returns and we'll do that by consistently delivering strong adjusted EPS growth. So how are we going to do that? The chart should look very familiar. We have a proven formula for success.
And that formula, we made the graphics look a little better this year, but the words are exactly the same. It's focused on our organic growth strategies, the strength of our PPI business system and our capital deployment approach. When you look at the organic growth, I've highlighted it and you'll get a good sense of why our outlook is so strong from an organic growth perspective. The PPI Business System, it was launched at the company in 2002. It's ingrained in how we work.
It really is the methodology that ensures that we're operating the company in a world class fashion. And you'll get a sense from Mark Stephenson on how PPI is applied within one of our businesses to make that business even more competitive. From a capital deployment strategy, It's the 3rd line that we pull. So you have strong top line growth, turn that into good margins through PPI and then you deploy the strong cash flows in our balance sheet to create additional value by strengthening the company's competitive position. We do that through a combination of strategic M and A and return of capital.
For the balance of my presentation, I was going to highlight each of those themes and what our plans are for the future in terms of how we're going to drive the growth that we Hi, Lads. For their growth, the first lever is around innovation. What you can see on the chart is the scale of our industry leading investments in innovation, about $700,000,000 annually. And the fact that since 2010, as we've continued to scale the company, we've been growing that at almost 20% a year in terms of Today, we invest about 6.5% of our manufacturing revenue in terms of R and D. On the right hand part of the chart, what you see are some of the priorities from a customer base that we're investing in.
From a healthier perspective, focusing on infectious disease, The promises of precision medicine and a big push into oncology testing. From Spectibol and water quality perspective To drug detection and pharmaceutical QAQC are all priorities. Alan Sachs, our Chief Scientific Officer, will give you more of a flavor for the specifics around our focus areas. The second of our organic growth themes and strategies is around our unique customer value proposition. I thought I would highlight what's happened in our position in biopharma to represent that.
In 2010, the biopharma customer base represented 25% of our revenue. Today, It represents 30% of our revenue. And when you do the math, we've grown much faster than the rate of market growth in the biopharma customer base. And for that, it and biopharma view us not only as the company that drives their productivity, but enables their innovation. And when you look forward, The future here in terms of the benefits of our unique value proposition are incredibly strong.
The opportunity is in 2 areas. One is to continue with our existing some of the but the way to think about it is, every time we launch a new product, It's an opportunity to go back to that customer base and talk about the exciting things we're working on. At the same point, every time we buy a new company, it creates that same opportunity, whether it's Life Technologies or ASI or Alpha Azar or Affymetrix, another opportunity to gain share with that customer base. And because of the way we work with our customers, we have a very deep portfolio of value add is awesome. But the second aspect of driving growth here is using this value proposition to more customers.
Some of you might remember back to that 2007 timeframe when we talked about our top 10 accounts. Today, we have over 200 accounts in our and we have many more beyond but it's there and industrial customers as well. So The fact that we have a great set of track records and case studies allows us to continue to expand the benefits of our unique value proposition. Tom Lowold will highlight this, in more detail in his presentation. The third of our growth drivers from an organic perspective is the benefits of our scale and depth in the higher growth regions of the world or the emerging markets.
And when you look here historically, We've grown this at about 20% as well. Today, it represents over $3,000,000,000 of our revenue or 19% of our company's scale of sales. Saiid Jaffray in more detail, but the way that you can think about it is the emerging markets are a portfolio of countries and they have There are different moments in the sun, if you will, in terms of what's doing well. In the bigger markets, China, India and South Korea, we have, which is a in high growth region. And in those markets, we're leveraging our strength and particularly capitalizing on the China 5 year plan.
Over the last few years, we've expanded our presence significantly in Southeast Asia, and we're capitalizing on our new strength in those markets It's driving growth as well. And in some of the markets where the shorter term are more challenged, we're poised to capitalize on those growth opportunities return longer term, whether it's the Middle East, Brazil or in Russia. So again, the third of our growth drivers is our scale in emerging markets. Those three factors drive top line growth. We convert that top line growth into strong earnings growth.
If you look back from 2010 To today, we've increased our operating margins by 500 basis points to 22.5% last year. Stephen Williamson will highlight our plans to continue to expand our margins, ensure and the business system. We come to work every day trying to make the company better, right. There are a number of tools that we apply across our businesses, things like 5S, Lean, Kaizens are all techniques that we use to make the company better. And at the same point, it is also our strategic to improve our competitive position as well, leveraging our global sourcing capabilities, Our low cost reach well as our shared services capability.
In fact, even the way we do integrations are using our PPI Business System Playbook. So This is our methodology in terms of how we execute in a world class fashion. So strong top line growth from the growth strategies, We convert that into strong bottom line growth from a margin perspective and that really sets us up for a very bright financial future. The final theme is around capital deployment. So you have good financial performance, strong cash flow generation And then we deploy the capital in a way to create shareholder value and strengthen the competitive position of the company.
The chart on the left It shows how we've deployed capital since 2010. We've been active. We've deployed $28,000,000,000 over that period of time. About 3 a little over 3 quarters of it has been on M and A and of varying sizes. And I've listed some of the notable M and A on the chart over that period And at the same point, we have returned just over 20% of our capital to our shareholders, primarily through purchasing $5 in shares over this period of time and being a steady dividend payer since 2012.
The opportunity going forward is around the fragmentation of our market. Earlier, I talked about the $100,000,000,000 market that we serve. If you look at the top, that means, companies like Affymetrix would be an example of that fragmentation, ASI, things of that sort. When Steven talks about the capital deployment plans, you'll get a sense of how much opportunity we have ahead given the fragmentation of it. So that's what we've done.
So our plans going forward. When you look at our viewpoint, when we talk about our viewpoint From a capital deployment perspective, it will vary in a given year because our job is to optimize based on the facts and circumstances that we're facing. But I thought I'd give you a longer term perspective, even outside of the 3 year financial model, to say how do we think about it. And the first point is that M and A will continue to be the primary focus of our return of capital deployment strategy. It will be the majority somewhere in the range of 60% to 75% of our capital will be deployed on M and A.
And return of capital will be in the range of, say, 25% to 40% over that When you look at the math that Stephen will walk through a little bit later, and on the opportunity set, The way to think about it is in the assumptions that we've made, we'll deploy about $17,000,000,000 of capital over this period of time and it could be more, it could be less, but it's a reasonable assumption. And if you look at what's implied on Porsche, it means about $3,000,000,000 of acquired revenue over that period of time. So $3,000,000,000 of the remaining 60, We're about 5%, not accounting for all the market growth in those things. So it's a very small portion of a very fragmented market. So lots and lots of opportunities to continue to deploy capital effectively and create shareholder value.
My comments, remarks, The first of which is we have a very long track record of successfully delivering against our financial commitments. The scale and depth of capabilities we have as an organization, really are differentiators in the marketplace. It gives us a very unique competitive position that's appreciated by our customers. Our growth strategy works and has many exciting opportunities ahead. Our PPI business system is a differentiator that drives profitable growth and our capital deployment strategy offers many opportunities ahead.
With that, I'll turn it over to our Chief Financial Officer, Stephen Wilson, who will talk about our financial track record as well as our 3 year outlook. Thank you.
So thank you, Mark, and good morning, everybody. It's a pleasure to be able to address you today. As Mark outlined, I'm going to talk about 3 things. First of all, I'm going to give you a grounding in 2015 and how we performed, reiterate the current guidance for 2016, and then I'll give you an idea of what the long financial future looks. Before I get into those details, I Want to show you a very familiar slide.
I think Ken walks around with about 500 copies of the slide in his briefcase even at weekends. But it's an important slide. It's a grounding in the revenue profile of the company because it helps reinforce why we feel so good about the long term revenue growth prospects for us. So you can cut it 3 different ways. First of all, on the left hand side, we serve 4 diverse end markets, all with good long term growth prospects underlying them from a market standpoint.
And in addition with our growth strategy, we're able to take full advantage of that market growth and take some extra share and drive organic growth. Then in terms of the middle pie on the page, in terms of the profile of what we sell, again, very attractive. Over 75% of our revenue comes from recurring Revenue. So strong consumables portfolio plus a very strong service offering for our customers. And then finally from a geographic standpoint, We're present key end markets.
Ifram is going to take full advantage of that scale to really outsize that growth in emerging markets. So we take the three things together. That's why we feel so good about the long term growth prospects for the company. In In terms of financials, also 15 and what Mark outlined, tremendous track record with a fantastic company, but what's most exciting is the future. Before I talk about that future, I think it's really important to understand, do we have the credibility to put forward the financials we've got from an outlook standpoint?
I think that track record slide that Mark showed you, good 'fifteen was just yet another year in that track record. So let me take you through some highlights from 2015. So 5% organic revenue growth, really good strong organic growth. I'm really pleased to say Life Science Solutions was 5% organic growth that year as well. So a real milestone For that business, growing a lot faster than it has done for some time, I got another long term outlook, Expansion despite very significant headwinds from foreign exchange.
So underlying, we grew our margins 150 basis points in 2015. So strong contributions from synergies from Life Technologies, using our PPI business system to really drive our productivity, also making sure that we're creating the 60 basin. And then from adjusted earnings per share, it's taking that growth and that margin expansion, generating cash flow, deploying capital and then creating adjusted earnings That's really the key to us. 6% growth in adjusted EPS. And I think that was really strong growth despite the FX headwind.
And I'll give you a little bit more detail of that on this next slide. So when we first put out our guidance in January 2015, we guided to $7.22 to $7.40 That would be 4% to 6 Growth in adjusted EPS. And at the time, it was 8% headwind from foreign exchange. Now as you're all painfully aware, FX was actually a stronger headwind in 20 than we'd originally thought. And actually it ended up being an 11% headwind for us.
So we actually stepped up and we actually operated the company in a really effective manner, and we are still able to deliver that 6% adjusted EPS growth despite 11% headwind. So that's 17% Growth in adjusted EPS on an FX neutral basis. So we got there by, well, first of all, recognizing we don't live in an FX neutral environment. FX is a real headwind. So we stepped up the operation of the company.
We took advantage of some pricing opportunities that were unique to the FX environment. And then frankly, we just managed the company appropriately given the headwind. We managed our cost base and we overgrowth productivity. And that allowed us to grow Our EPS by 6% in 2015. So a very strong year from a financial performance.
Another area of strong performance in 2015 was We were committed to get down to a range of 2.75 to 3 times within a couple of years. Now in a shorter period of time of that, we were able to get there. And in 'fifteen, we also did a couple of small bolt on acquisitions and a small share buyback as well. So I think a really strong performance to get to the 3x leverage. Really important to do that because one, it demonstrates the strong cash flows that we generate as a company.
We integrated Life Technologies very effectively. It's also a demo we made to our rating agencies and our future flexibility to do when the right M and A target comes along. So maintaining that investment grade rating and living up these commitments is an incredibly important part of our long term capital deployment strategy. And then just to wrap up on 2015, continued focus on increasing return on invested capital. And here I've picked Q1 to Q1 because this is when Life Technologies is fully in the calculation for the company, and it shows you that we're focused on expanding ROIC.
We do that by being focused on ROIC today from large decisions, business level and tend to go along with a new product introduction, making sure that we're Fully focused on why we're spending and what return we're getting because we've got scarce resources to go around. So making sure that we've got the maximizing there for the whole company. So overall, generating solid returns in the short term, but also making sure we're investing for the future. And the good news is 2016 is going to be even stronger. And just to be very clear, this is reiterating the current guidance we gave on the earnings call a couple of weeks ago.
Got 2 pages, 1 on the assumptions and then 1 on the financial output. I won't take you through all of the details here, but take you through some of the assumptions, About 4% organic growth. And that comes from that growth strategy that Mark outlined. It's high impact innovation. It's making sure that we're using our scale and depth capabilities to Bringing unique value to our customers and is taking advantage of growth in emerging markets.
From an M and A standpoint, one key highlight is Affimetry. It's now fully in our guidance for Dean. We said about $0.01 of adjusted EPS for the 1st 12 months. That translates to $0.06 in 2016. And they'll be adding about $275,000,000 of revenue for the current year.
FX, unfortunately, is still a headwind for the company. It's significantly less a headwind than it was back when we gave our initial guidance in January. Adjusted operating margin expansion, Still expanding margins, 50 to 70 basis points in terms of our outlook, again using the PPI business system, but also making sure we're investing for the future. A lot of noise about calendar days. We'll try and make that as clear as possible as we go through the year on the earnings calls, but 4 additional days in Q1, Four less days in Q4, but no difference for the year as a whole.
And then finally, capital deployment. We've got $2,600,000,000 of capital Deployments in our current guidance. That includes dividends for the whole year, but only acquisitions and M and A that we completed at the time of our guidance. So no additional capital deployment in the current guidance. So what exactly does it gives us this very good financial profile for 'sixteen?
So the 6% reported revenue growth, about 4% organic, adjusted operating margin expansion of 50 to 70 basis points And then adjusted EPS growth of 9% to 11%. Take into consideration, FX has 10% to 12% adjusted EPS growth. And then translating that into 12% growth in cash flow over 2015 to over $2,700,000,000 of free cash flow. So I think you agree that The long track record we've had, 'fifteen was yet another year there and 2016 is going to be another solid year as well. So I think that gives us the credibility to show A really bright financial future and I'll turn to that now in these pages.
So think about the company and what we're generating in terms of shareholder returns and very strong shareholder returns, over the future period. And the future period here is a 3 year convention, 2017 to 2019. And it's a combination of running the business really well plus very effectively deploying capital. The combination of those two things allows us Continue to drive very strong shareholder returns. Now as a company, we measure everything.
We're a very metric driven company. But at the end of the day, the most important metric for us is adjusted earnings per share because that's the culmination of all the things that we're doing. Think about balancing growth and margin expansion to generate earnings. It's about taking those earnings and then converting them into cash in a very effective way. It's using the strength of our balance sheet and the efficiency of our tax structure to then substantially deploy capital.
The combination of all of that culminates in adjusted earnings per share. So cutting to the chase, this is the output of that long term financial model. It's a combination of all of those factors of managing the company really well and effectively deploying capital will get us 12% to 15% growth And adjusted earnings per share on average each year over the 3 year period. So continuation of that really strong set of shareholder returns. So what I'll do now is take you through the assumptions behind this long term model.
And again, it's just one model that includes M and A because M and A is going to be an
important part of our strategy going forward as it
was in the past. And what this model represents is Going forward as it was in the past. And what this model represents is good, aggressive and active management of the company and very effective capital deployment. It's what you've come to expect from us. So I'm going to take you through, first of all, how you expect us to manage the assets that we own today, And then I'll supplement that with the below the line assumptions and capital deployment, all of which culminates in the 12% to 15% growth in adjusted EPS.
So first, again, just to reiterate, this is how we expect to run the assets that we own today. This doesn't include any future M and A. That goes on top of the set of results that you have here. And I've been on the road a lot with meeting a lot of investors, a lot of analysts over the past 12 months, Lot of discussion about these three key assumptions at the top of the page and the different ranges of outcomes. And first of all, we were up 4% to 5% organic growth.
Now we see over this 3 year period of being in the range of 4% to 6% organic growth. Given the current composition of the company, the strength of Life Science Solutions and the strength of our end markets, we think it's appropriate to model a company within a range of 4% to 6%. And that translates into 20.2 The $21,200,000,000 of revenue by 2019. So now you balance the growth with the margin expansion. So margin expansion really comes from driving PPI really strong to drive our productivity levers, but also making sure we're investing to make sure we maintain that growth level.
And we think an appropriate level of margin expansion from the 4% to 6% organic growth is 40 to 50 basis points over this time horizon from that organic growth. Now in addition, we have the benefits of Affymetrix acquisition over that 3 year period as well. And that brings an extra 10 basis points a year on average over the 3 year period that gets us to the final 50 to 60 basis points of expansion in terms of the long term financial model. So the combination between the margin expansion and the organic growth Gets us 6.9% 6% to 9% adjusted operating income growth. So it's the combination of those two factors that's driving the earnings growth.
Now last year, we outlined a range in 2018 of 24% to 26% for our adjusted operating income. Now we look at this model and inside this model for 2018, we're still in that range. Now unfortunately, we have 55 basis points of headwind from foreign exchange more than we had this time last year, but we're still in that range. So I think 25% by 2019 is a reasonable goal given the 4% to 6% organic growth. Then the next assumptions on free cash flow is 90% conversion of adjusted net income to free cash flow.
On average, the past 5 years, we've been at around 87% free cash flow conversion. Last couple of years, we've been adding some working capital, Mainly inventory to capture more growth for the long term. We think we're at the right level of inventory now to be able to sustain the 4% to 6% organic growth. And so 90% free cash flow conversion is a good assumption for the model for the next 3 years. So all of that culminates at the bottom of the page of 80 To 110 basis points a year increase in return on invested capital.
So very strong operational outlook and again from the assets that we own today. But that's not the full story. We're clearly going to be deploying a significant amount of capital, which really gets to this page. So Mark stole my thunder and talked about the scale of capital deployment. So it's $17,000,000,000 in my model.
So where does that come from? Well, first of all, We're expecting our earnings to be growing over this period of time, and that will enable us to take on $6,000,000,000 more debt And still maintain a 2.75 times leverage at the end of each year in the model. So that's very significant. So we're able to do that and generate that capital to deploy and still maintain the investment grade rating. And then in addition, we're going to generate about $11,000,000,000 of free cash flow over this So that gets you to the total $17,000,000,000 to deploy.
Mark outlined a range of outcomes of How do we deploy that capital over the long term? From my model, I've used the seventy-thirty split. I think that's a reasonable set of assumptions for how we want to deploy capital over the 3 years. In terms of the returns of funds to shareholders, Still maintaining a dividend, growing I've mulled it growing at the organic growth rate revenue organic growth rate of the company, And the rest goes to buybacks. And that's $12,000,000,000 left to deploy on M and A.
Now modeling M and A in the long term model can be a challenge. It's What are the assumptions around timing, size of acquisition, purchase price, the acquisition, the financial makeup of the acquisition and what returns we're expecting? For this model, I've similar to prior years, series of bolt on acquisitions, relatively linear across the 3 year period. All of that adds up to about $3,000,000,000 of revenue in addition to what you saw on the prior page in terms of scale. I've modeled Buying businesses with the same financial profile as Thermo Fisher Scientific, so the same relative growth rate and margins to basically come up with this model here.
And then again, just to reiterate, this model includes leverage at 2.75 times at the end of each year in terms of that set of bolt on acquisitions. Then the final assumption of long term model is tax rate. And again, this is another one that we've talked about whilst I've had my discussions on the road with a lot of you. I take a step back and think about the company, think about the current composition of the company, where we do business, where our profits are generated, where the legislation is like in terms of tax in those jurisdictions, plus the future flexibility that we have with our tax structure And the extra flexibility we'll likely get from M and A, I think 15% is a good rate to include for tax in 2019. We're going to cap out at 15% in that 3 year period.
I've modeled it increasing linearly over the time horizon from 14% in 2016 to 15% in 2019. So that combination of appropriately aggressively running the company, Deploying substantial amounts of capital, but in a very disciplined way, culminates in the 12% to 15% growth in adjusted earnings per share. So Very strong shareholder returns and I'd argue that's a continuation of the great track record that we outlined earlier on. So when we execute the strategy really well, it's a really bright financial future ahead of us. So that's the recap on the financials.
We'll now transition into a series of presentations to give you some more color on the growth strategy. First presentation is going to be from Tom Lowell, our Chief Commercial Officer. He's going to take you through why our unique scale and depth of capabilities brings a unique customer value proposition to our customers in a way that nobody else can in our industry. So I'll now hand it over to Tom. Thank you.
So thank you, Stephen, and good morning, everybody. So I'm going to build off of what you heard from Mark and Stephen this morning and talk about how our unique scale and depth create commercial advantage, differentiated customer value and ultimately great growth prospects for the company. And we're going to break my presentation up into 2 sections. As Mark mentioned, I'm going to give you first a brief profile of each of our businesses, And then I'm going to go into a discussion about how we take the synergies from each of these businesses, combine it with the investment we've made in enterprise wide Commercial capabilities to fuel our growth strategy. So Mark presented this Page earlier, so I'm just going to accentuate the impact on our commercial capabilities from our industry leading position.
As you heard, we have 5 premier brands: Thermo Scientific, Applied Biosystems and Invitrogen that are represent our strength in technology and our leading product positions. And then Fisher Scientific and Uniti Labs Services that represent our strategic partnership capability with our customers to drive Cost efficiency and productivity for them. And it's the combination of our brand strength and our commercial organization, which is Clearly, the largest in the industry, that means we're adding more value to more customers every day than anyone else. So here's how we're organized. We have complementary business segments.
Our Specialty Diagnostics, Analytical Instruments and Life Science Solutions businesses make up a little over 60% of our revenue base, and our laboratory products and services makes up the remainder. And I'm now going to go through Each of these segments briefly and show you a revenue profile that I think will look familiar to you. So first, Analytical Instruments. This is a business I had the honor of leading the last few years, and we are known for leading technologies to help our customers solve Complex challenges. You're most likely most familiar with our chromatography and mass spec business, but Our products and services go far beyond just the laboratory.
We provide a range of products for applied Online applications as well as field settings like environmental and security with the strength of our handheld technologies. Our product revenue is highly focused on our instrument sales, but we get a fast growing stream of service consumable revenue that we've got. And then lastly, in terms of geographic distribution, you can see we are very well balanced geographically, but we have a very strong presence In Asia Pacific, where we have made direct investments in sales, in service, in local manufacturing and in local R and D to ensure that we have the capability, unmatched capability to support our customers in this fast growing region. 2nd segment is Life Science Solutions. I'll go through this pretty quickly because you're going to hear a lot more about Life Science Solutions from Mark Stephenson Later.
But we are a life science powerhouse with strengths and leadership positions in bioproduction, genetic sciences And biosciences, we have a very attractive recurring revenue stream with 83% of our revenue from consumables And here again, a very balanced geographic revenue split and high margins at over 30%. So our 3rd segment is our Diagnostics, where we have built a $3,300,000,000 Diagnostics franchise through careful investments to create leadership positions in niche diagnostic areas. Here again, the recurring revenue stream is very attractive. The margins are high. And here, we have a tremendous opportunity to grow in Asia Pacific and Emerging Markets.
As you think about the investments that those economies are making as their population ages In health care and in the special diagnostic solutions that we can provide them, that means we have a great potential to grow in that region. And then lastly, we have our laboratory products and services, dollars 6,900,000,000 in sales. It is made up of our premier channel Under the Fisher Scientific brand, the largest laboratory products franchise in the industry with our consumables and our equipment business And then 2 great service businesses, biopharma services, which you see on the page and also Uniti Labs Services, which I'm going to talk more about. So this is our portfolio, and it's by creating the synergies across these complementary segments that we drive the 3 pillars of our growth strategy: 1st, high impact innovation secondly, scale in emerging markets and then last, our unique customer Value proposition. For high impact innovation, we are able to take the technologies across our different businesses And apply them into growth areas.
So life science tools into the clinic is one example. Laboratory tend to we are also able to invest on proactively new technologies that cross over the boundaries of our segments. You're going to hear a lot more about this from Alan Sachs, our Chief Scientific Officer, right after the break. For scale in emerging markets, that has been a huge driver of growth for us over the last few years. We are able, because of our scale, to create a customer experience and a customer experience.
We are close to the customer and that we have the cost position that allows us to compete. You may recall from my presentation to you last year that I gave the example of our Singapore site. We have a Singapore manufacturing site that our Life Science Solutions business uses to produce instruments. And we recently launched in our analytical instruments, our chromatography line out of our Singapore site. And then lastly, our unique Customer value proposition, where we combine the strength of the products and the businesses that I just mentioned with the investments that we have made in commercial capabilities that I believe are truly unique and unmatched in the industry.
And I'll go through each one of them. The first is our channel. The second is our service organization and capabilities. The third is our leading e business presence. And lastly, we have our extensive Corporate accounts program.
And all of that has been put in place to focus on producing the customer value that you see represented in our customer value all, I think you're very familiar with it. But all of this is about helping our customers drive innovation, advancing their research And generating the productivity and cost efficiency goals that they're looking for. So I'll start with our channel under the Fisher Scientific brand. Our customers see our channel as the premier source For first choice and convenience, we have over 800,000 products available through Fisher Scientific Channel. Secondly, they're looking for a differentiated range of services.
And third, they're looking for our ability to support their operations wherever in the world they are. And our ability to do that in multiple geographies is key. Really, no one else has this combination of a premier channel to market And the self manufacturing businesses that I referred to earlier. And in my almost 14 years now with the company, I've run different The equipment business, environmental business, our analytical business. And in each case, my businesses are more successful because of the partnership that we had with our channel.
The ability to have deep intimacy with our customers because of our channel relationships, the relationships our channel has with procurement, All meant that I could take our specialist organizations in each of these businesses and combine it with this pervasive relationship our channel has with our customers. And you're going to hear later from Mark Stephenson about the impact that our channel has had on the growth in the life sciences business. And we created Unity Labs Services to do 2 things: 1st, to ensure that we had a high level of performance service performance across all of our businesses that our customers could count on. And then secondly, we could provide the range of services that our customers are looking for. It Start services you see on the left side of the page, so making sure our own equipment is up and running and working well.
But it quickly expands to the other services that you see Across the page, our customers require to ensure that they maximize their efficiency. We have 3,200 Service employees around the world with an incredibly deep attachment to our customers because we're in their labs every day helping them Optimize their operations. So our 3rd Commercial capability that we think is so impactful is our e business and digital marketing
program.
We're
going to thermofisher.com, which is a source of rich scientific content for all of our self manufactured products. We relaunched the site last year, And we're seeing great adoption and use of the site. We then go to fisherside.com, which is Clearly, the premier site for e commerce for our customer base. Our customers' procurement arms look at the fisherpsci.com site as an Essential tool for them to have efficient procurement processes. We then localize our website.
So the example that you see on the page is Thermo Fisher Centimeters. This is our China website, which we launched A year ago, we're seeing tremendous adoption on this site, both end users looking for content, but also e commerce on the site. And then with our instruments to the Thermo Fisher cloud and allow our customers to take the output of their research, Stored on the cloud and enable them to collaborate and share their information and find correlations in their research across, their enterprise. In total, across all of these web properties, we have over 60,000,000 website visits per year rapidly, which I'll And lastly, we have our corporate accounts program, which is now in its 8th year. And our corporate accounts program was based on a very simple concept.
It was that taking a proven It was that taking a proven corporate accounts process and a really strong team, C suite engagement, senior Scientific collaboration programs that we could connect our customer in a highly effective way with unrivaled customer access And a position with our customers of true strategic partnership that really none of our competitors have. We started this program, Mark mentioned, 8 years ago, but we've expanded it fairly rapidly across the other segments that you see on the page and have well over 200 customers in the program. And when we apply the corporate account process and this team To our relationship with our customers, we are seeing growth rates well above the company average and well above the market. So to bring it all together, what does this mean for our customers? And here, I'm using an example of 1 of our biopharma customers.
What this means is that between our businesses and the commercial capabilities I just talked about, we are able to supply value across the entirety of a biopharma workflow from discovery and development to clinical trials to production And commercialization. And each of our businesses has a relationship with different parts of this workflow. We have specialists focus on different parts of this workflow. But then we apply the 4 commercial capabilities I just talked about. We have Fisher Scientific's relationship across the customer At the procurement level, we have our service organizations working in each element of this workflow.
We have our e commerce Capabilities providing information to our customers. And then lastly, we have our corporate accounts team. Where are the really key areas where we need to apply our resources To what is strategic to you. It could be a new acquisition where they're looking for help to generate synergies. Could be a big investment in new technology, The opening of a new lab, that's when we sit down with them and make sure that we're applying our resources across this workflow most strategically.
And I picked biopharma as an example, but this applies equally well to our other large customers. So to wrap up, we have industry leading businesses. We've got a scale and depth of capabilities that fuels Our growth strategy. We have truly a unique customer value proposition that is driven by these commercial capabilities I just talked about and plenty of runway for growth in the future. So I want
to thank you for your
time and attention. I'm going to have Ken come up and announce the break.
Thanks, Tom. We're going to take a short break. We're going to start back up precisely at 10:15. Thank you. Okay.
We're going to start back up. If you could get back into your seats, Please, we'll get on with the program. So we're going to have 3 more presentations and then we're going to, have a Q and A session. We're going to be wrapped up right about 11:30. So at this point, I'd like to introduce our next presenter, Alan Sachs, our Chief Scientific Officer.
Alan?
Well, thank you and good morning
to everyone. It's really Pleasure, as a CSO for Thermo Fisher Scientific to represent our 4,000 R and D staff and help the audience Appreciate how our mission statement to enable our customers to make the world healthier, cleaner and safer really is driving how we think about new product Development and how we address some of the concerns that are happening in the world around us. As Mark said in his opening comments, this is the 10 year anniversary for Thermo Fisher Scientific. And I'm going to Spent a little bit of time on the top line, which goes through some of the advances that have been made over those 10 years, in part because It really drives home the message that we have a very strong track record, but also to remember that a lot of the staff that were involved in these innovations are still part of our company Still pushing forward on new innovations, because this company continues to enroll quality people. So we've heard about the Orbitrap, which certainly set the standard for quantitative mass spectrometry and really Has led mass spectrometry generally into a new era.
The bioproduction business and the single use technology Really began in anticipation of what happened, which is very large steel containers growing cells to produce biologics were replaced with disposable type containers. And that innovation really has led to incredible growth as has also been discussed in our bioproduction business. The ImmunoCAP technology really is based on an appreciation that antibodies to allergens can be measured in our blood very simply. And that antibody is called an IgE. And that technology allows, instead of a pinprick test at a dermatology at an allergy specialist for an immunoassay to see if you're allergic to a bee venom or a snake, Excuse me, or a pollen or dog dander, etcetera.
And so that's an amazing technology because it is based on the innovation And then lastly, going all the way over to the right, our Our S5 DNA sequencer is really next in the line of generations where we were the first to create an automated DNA sequencer. And the next gen ionturen system really is just a continuation of that history. So the company has a lot of very talented staff. We have a long track record of success and the company continues to invest very heavily, so we Continuing on innovation. On the left, you can see that we spend almost over $700,000,000 a year.
I like to think of that as almost $2,000,000 a day every day on R and D. That's a very significant investment, all designed to enable our customers. And you can see the breakdown on the left in the different segments that were discussed by Tom just prior to the break. Now having the scale is one thing, but one also needs the depth because wasting money in R and D is actually somewhat simple, but creating products that actually meet a customer need is much more difficult. And so our segments have within them businesses where the people In those areas and are competing day to day with the other providers of these types of instruments and technologies.
And so for example, in the analytical We have mass spectrometry, chromatography and portable analytical instruments as separate businesses that Understand the dynamics of the marketplace and compete effectively. And likewise for the other segments. And Mark Stephenson later This morning, we'll talk about the Life Science Solutions. So that advantage of having this deep depth, with the scale of investment is Truly unique, and we are the largest R and D spend we have the largest R and D spend in the industry. One additional advantage we have in addition to the breadth, the depth of the R and D teams, 4,000 people, a very large patent portfolio, very much focused on customer needs.
And this history that I discussed is they were also integrated across R and D. And so we have a globally integrated R and D team. We focus a lot on talent management, retaining the staff that over those past 10 years Have created the innovation as a very high priority for us. We focus on best practices, not just PPI, but other ways To rapidly develop instruments and consumables efficiently. And lastly, we do a lot of cross Segment partnerships and collaborations because it's the combination of mass spectrometry and next generation sequencing that will lead to Products that no other company can make and we're very well positioned to create.
On top
of that, we have a very Strong Scientific Advisory Board from the institutions listed. And we use the SAB to both provide input on what we're doing and give feedback as whether we're going in the right direction, but more importantly, to alert us to what's happening in the outside world and prepare us for the new products To come. And along the same theme, our technology partnerships in government, industry and academics Gives us a very close relationship with our customers to understand what their needs are and again helps us design these new products that will meet, whatever demand they're seeing. So we have this environment that nurtures innovation because we have the depth That's business focused, but just the breadth across the businesses that give us the unique perspective and scale, in the industry. And so our customers see a lot of problems in the world.
We all do. These are some headlines, that when we read, we say, well, we actually have a solution to those Problems, we're not really a hammer looking for a nail because of the breadth of our technologies. We identify these problems with our customers and then bring the right technology solution to the forefront. And whether that's improving human health, monitoring our environment, ensuring the quality of our food Hi. These are all areas that, independent of the technology, solutions are needed, and that's where we working with our customers, come in.
And so what I'm going to do, and 6 slides following is focus a little more deeply on how we enable our customers to take on these problems to make the world healthier, cleaner and safer. And I think in each case, you'll see at the base of it is an ability to create Disease, precision medicine or oncology and likewise for air and water quality or food testing, we play in these spaces with a very wide range of Technologies and Solutions. So let's start with Healthier. Many men in the audience, and excuse me, let's start with healthier with the sepsis challenge. So when we're going to a hospital, unfortunately, Infectious disease in the hospital is rampant and often patients show up with a high fever after a few days in a hospital Physicians don't know what's going on.
That's often due to sepsis, which would be a lethal event because a lot of the bacteria in the hospital are antibiotic resistant. And so our solution to that problem is the PCT test, which is a diagnostic that allows for the detection of sepsis generally in a patient very quickly. And so physicians know that a patient is septic and need to get to work very quickly on finding the right antibiotic. Likewise is Zika virus. Zika, as we all know, has appeared rather abruptly And is a real threat to women of childbearing age because they are unsure as to whether they've been infected and don't want to run the risk of becoming pregnant and possibly having a child who may suffer from microencephaly.
We reacted very quickly to this as we do generally to Infectious disease by developing a real time PCR test, which is delivered in a dry format, so that it can be around the world, not requiring Duration of freezing. And we expect soon to be launching this Zika test that not only detects Zika, But also rules out that it isn't a related virus, such as dengue virus, which is which needs to be separated from Zika in the differential diagnosis. And lastly, Ebola. Ebola, the threat is still there. It's not exploding right now, But the detection of Ebola is critical, to understand what you're dealing with.
Our next generation sequencing systems We're deployed and are deployed in hospitals and clinics that you wouldn't imagine could be running next generation sequencing. But because of the simplicity of the system and the rapidity of the answer. Next generation sequencing allows for the definitive diagnosis of Ebola in these patients really at the site. So that really is one example of infectious disease examples of infectious disease testing. We have many more, but it Shows you how these different technologies, immunoassays, real time PCR, next generation sequencing are applied to these problems.
Many of us are parents. You could probably place the age of that child, I would say somewhere between 8 months 15 months, Just a guess. Unfortunately, that child can't speak and often they come to a physician's office failing to thrive and physicians don't quite know what To do, the odyssey that parents go on to understand why their child is not thriving can be rather long. We feel that precision medicine will enable a better diagnosis of what's happening with the child, and as a result, allow them to get healthier. So for example, how do you know if the child is suffering from an inherited disease?
Our solution is next generation Sequencing, there are a limited number of gene mutations that lead to inherited disease. Our next generation sequencing solution only sequences those genes. It does not sequence the whole human genome. And so it's very rapid and cost effective way for a physician to declare whether there is an inherited disease potential in that child. Likewise, chromosome abnormalities.
For whatever reason, a mother's egg or a father's sperm, when during early development can lead to changes in chromosome number Or parts of the chromosome. It's very hard to see that under a microscope because these can be very small changes in parts of the chromosome. But they do lead to significant disease that you cannot predict what the presentation will be. So the Cytoscan DX chip from Affymetrix takes Head on, the Affymetrix technology lets you scan our genome for changes in how many chromosome and chromosome Pieces there are in our genome and at a very cost effective price point and very rapidly now physicians presented with their child who's failing to thrive can see If there's a chromosome abnormality in that child. And lastly, metabolic disorders, it would seem Obvious that if we have floating around in our blood high levels of poison derived from Poor metabolism or over metabolism of certain things we eat or byproducts of our own body, that should be simple to detect.
And in a child with a disease, sometimes those are way over normal in amounts. Our mass spectrometry systems allow for the Simple detection of metabolites in blood that can then allow for an understanding that, You know, this child is suffering from this disease because they have this much higher level of lipid or fat in their blood than normal. And so again, that young patient presenting, gone through the odyssey of how many doctors one can ever predict. These new tests should help them significantly through Thermo Fisher Scientific and allowing them to do a better job in diagnosing Someone who can't speak. And then we have oncology, which is a big A large focus for the company as well.
And detecting cancer is an area that We would all like to hope improves. And as I began earlier, there are a lot of men in the audience and those in the 15 and older range are Concerned about prostate cancer for sure and know that the PSA test exists, but also know that maybe the PSA test isn't that predictive and no one really wants They go through a prostate biopsy because of a test that doesn't really have specificity or the ability to really be clear that you should have the biopsy. So Thermo Fisher collaborated with the Karolinska Institute to build the beyond PSA prostate cancer test, which is a test that uses the PSA levels, but other measures, both protein and nucleic acid, to assess whether a man is at risk for prostate Cancer, based on those markers, of this test, there should be a very significant reduction in the number of biopsies needed in the world, because the test will rule out the possibility of having cancer even though the PSA test may have come back as suggesting otherwise.
These tests
are run on both our open array system, which is a PCR system, as well as Protein array system from our immunodiagnostics business. Now if anyone is unfortunate enough to have cancer, we all know people who have had cancer. You really want to know more than I have Breast cancer, you want to know what type of breast cancer and most importantly, what can I do about it? And so this refining diagnosis piece from the patient's perspective is tell me an actionable Result from the test. I don't want to be only supporting research for someone else.
I want the answer For me. And so we're developing and continue to advance our Oncomyte cancer panel, which is a test which only measures DNA sequences that if there's a difference, you can act on it. The physician can give you a specific drug We'll rule out a specific type of treatment and as a result, give you the patient a much better chance of long term survival. This panel again, like the inherited disease panel is a smaller panel. It's much less expensive than a whole genome sequence And it's very, very rapid in the ability to get the sample and go back and get a solution.
And lastly, once you if you do have cancer and you are being successfully treated, you always have lingering in the back of your mind has the cancer come back. And a real change in oncology has been the recognition that in our blood are fragments of DNA from our From a tumor and you can sequence that tumor DNA in blood and that's called liquid biopsy. And by sequencing the DNA in blood That came from the tumor, you can tell if the tumor is changing, is going away or is responding to drug treatment. And so we're very involved in and we'll be launching soon a test in lung cancer that allows you to measure DNA fragments and tell you what type of mutations are in the cancer and if those mutations are changing and if the patient will be responding to treatment. That's health.
We all are healthy in part because our environment is clean. We expect Governments and more generally, society to make sure our air is clean, our water is clean. Of course, there are many regions in the world that are developing that isn't as true as it is here in the United States. And so we are also very involved in making sure that The quality of air and water is constantly monitored and that, that information can be broadly available through connectivity into the cloud and the Internet. And so with respect to water quality, a sewage plant or a factory which is treating water needs to be monitored 24 hours a day for the quality of that cleaning.
And for example, organic compounds coming out of a sewage treatment plant Can suck up oxygen in the water and kill all the life in the stream because there's no more oxygen. Those organic compounds Our detected through a chemical oxygen demand and we make an analyzer like that. We make many other analyzers for continuous treatment, Water treatment testing, and we are really proud that these are very well received and used across the world. Airborne pollutants are another interesting one. We're all familiar with asbestos.
Asbestos is an irritant that lodges in our lungs and can't be cleared and basically over time leads to other unfortunate consequences in the lung. Pollutants generally have that ability. And when the particles are small especially, they sit there and just lead to long term health consequences. So we manufacture and sell across the world particle detectors in the submicron on the micron scale, 2.5, 10 microns, which can be placed throughout a city, throughout a region, to continuously measure the amount of particle in the air as an indirect indicator of the health Of the healthy environment or the lack thereof. And lastly, there is a lot of Unknown contamination going on, unfortunately.
We hear about it afterwards. And so many of our customers are interested in figuring out, Is there a contaminant here in this food, in the water, in the air? And our mass spectrometers are used around the world to do both known and unknown contaminant detection. So we really are involved in helping to assure the quality of air and water, both proactively through monitoring And through experimentation, using mass spectrometry and other technologies. Lastly is our food supply.
We all When we go out and eat in the lobby that the food is safe. Food safety is something that needs to be assured every day by produce by growers, producers and those who deliver. And so for example, in ground beef, We know that we need to cook our ground beef, but we also know that it's being tested for bacterial load. That testing is done using Thermo Fisher Scientific products, whether through Classic microbiology techniques, but also through real time PCR. And it isn't just for ground beef, it's for many, many different kinds of food products.
And we continue to create new food testing solutions. No one wants to open up a box of cereal or another package good and find a metal fragment or a piece of bone or Or a piece of bone or something in there. And unfortunately, that can happen randomly during the packaging process. And so we sell an X-ray detection A system that's in line, so the packaged products are flowing through the X-ray detector, and it allows the producers and manufacturers to discard, For whatever reason, food products that are contaminated and other insurance of our food quality supply. And lastly, pesticides, particularly now are becoming more and more present, And we don't know, we have orange juice or apple juice or any type of jelly, etcetera, what the pesticide level could be.
And the manufacturers of it Really our testing for pesticide levels using mass spectrometry and chromatography beforehand in order to ensure the quality of these fruits and vegetables before they pull them or create products from them. And so that also is a very exciting area for our company. So in conclusion, I hope I have been able to help you appreciate that the 4000 R and D staff in the company Really are working to make the world healthier, cleaner and safer. We do have the largest R and D investment in the industry. We have this really strong track record of technology that meets customer needs.
And as I said, those staff are still with us. We're very applications focused on the customer need, Not so much a hammer looking for now, but what solution do we need to solve? What solution is being looked for? And it's an integrated R and D organization, meaning that we can go across these different technologies to create that solution. And lastly, the challenges that are that we face every day in SITE are really the basis for how our new products get developed.
So with that, I'll close and call, Saiad Jaffray, who will talk about our emerging market efforts.
Thanks, Alan, and good morning, everyone. So As Alan mentioned, I'm responsible for our businesses in Asia Pacific and Emerging Markets. Earlier this morning, you have heard from a number of my colleagues that The driving of growth in emerging markets is one of the 3 key elements of our company's growth strategy. And I'm very excited to tell you a bit more about the progress that we are making in expanding our presence in these high growth regions and how we are reaching out to more customers in these markets. Earlier, Tom Lowald talked about how we are leveraging Our industry leading scale as a foundation for growth for our company.
And that theme is central to Our approach in emerging markets as well, where we are leveraging our scale to drive growth for our business in those markets. So over the next few minutes, I will spend some time to share with you our overall strategy For the emerging markets, I will give you some more details as to where we see The next big opportunities in China, and I will discuss how we plan to Translates some of the successes we have had in China into other countries like Singapore and Korea and India, while we are also making investments in the other evolving markets where we see potential growth in the future. So just to ground you, we have the largest Operational and commercial presence in emerging markets in our industry. As you can see that we are covering a vast area of countries starting from The established areas like China and India and going all the way to the areas where we are still evolving. We are making significant investments in localizing our resources in these markets because we believe that having our resources close to our customers is very important in making sure that We are able to understand the challenges that they are facing and the many opportunities that we have to address those challenges working with those customers.
So let me spend a few minutes to talk about our strategy, which is really a continuation of what I have presented to you in the past as well. Basically, We are continuing to expand our presence in these markets by investing in commercial resources And to improve the customer experience, we are resourcing and optimizing our supply chain And service capabilities so the customers can have a good experience working with Thermo Fisher. And very importantly, We are developing more products in the region locally so we can compete with the local competition, especially in those mid level markets, which is a significant competitive advantage for us. And I should point out that One of the things that has made us successful in emerging markets is a very talented workforce. We attract top talent.
Our employees recognize that they can have long term exciting careers with Thermo Fisher because of our size and because of our scale. If you look at our financial performance over the last 5 years, our CAGR has been 19%. We have more than doubled our business in the last 5 years, and I believe that this shows that our strategy In these regions is working, and we will continue to build on the strategy to drive future growth as well. So let me spend a few minutes to share with you as to how we think about capitalizing on growth opportunities in emerging markets. It is certainly not A one size fits all approach.
Earlier, I made a remark about the advantage of scale. So what we have been doing is, we have been building scale in the countries that you see on the left side of the slide, And that is where we have very well established presence, very well established infrastructure. And then on the far right of the spectrum are the regions where we are still evolving depending on the dynamics of the markets in those regions. And then in the middle, you have the countries that are somewhere in between. So let me give you an example.
In countries like India and China, We have well established infrastructure. We have solid country leadership teams who are delivering Double digit growth, and they are gaining share in these countries. As you move to the middle, Countries like South Korea, Malaysia and Singapore, this is where we are making significant investments, And these are more recent investments, and we are seeing very good return on these investments already. These are the countries where, for example, in Singapore, we are connected with some of the large research organizations that are beginning to get significant R and D funding from the government, especially in the area of health care and diagnostics. And we are making sure that we are working with them very closely to support their needs.
We are also leveraging The global relationships that we have with the large pharmaceutical companies to become their supplier of choice in Singapore. In Malaysia, where the economy has been challenging and you all know that the currency has been weakening in that country, But we have been able to deliver some good performance in Malaysia by focusing on some short term large projects. So last year, for example, we won a $10,000,000 environmental monitoring project in Malaysia that was funded by The Malaysian government, and that has helped us in normalizing some of the economic challenges. Now let me move to the right side of the slide. So markets such as the Middle East, Africa and Latin America, these are the markets where we are seeing some challenges today.
So in the Middle East, for example, We are working on some large forensics opportunities that are linked to the national security related projects in some of the Gulf And the other market that we see as a long term growth opportunity for us is healthcare in the Middle East. In Latin America, we all know that Brazil is struggling economically. I was just in Brazil last week when the President was impeached. But we have been gaining share in Brazil. Last year, we were able to win an $11,000,000 project to help a customer build the largest drug testing lab in Brazil for the upcoming Olympics in Rio de Janeiro.
And then in rest of Latin America, We are focusing on countries like Chile, Peru and Mexico, where we are seeing some very good low single to mid single digit growth in the revenue state. So I hope that This helps you understand what our approach is and also how do we go about allocating our investments in these emerging markets. So let me talk a little bit about China. As you know, we have had great success In China for the last several years. And when I think about China, I see a developing market where our customers are experiencing a developed market experience.
And let me explain what I mean by that. So over the last few years, we have made some major investments in building our capabilities and infrastructure in China. And today, those capabilities are very similar to what we have in the developed Countries such as the U. S. Or some of the Western European countries, they're very, very similar.
And earlier, You heard Mark's comments about the 10 year look back to the time of Thermo Electron and Fisher Scientific merger. The fact is that even 10 years ago, we were well entrenched in China. And over the last 10 years, we have worked hard to build on the solid foundation we had in China. And today, we are offering our customers their developed Market experience and those developed market capabilities.
So in
China, we have experienced steady growth over the last few years. You can see the CAGR is about 28%. And last year, we developed we delivered $1,400,000,000 in revenues. We have a large and scalable infrastructure In China, our commercial teams are expanding their reach. They are reaching out to more customers.
We are expanding our presence in Tier 2 and Tier 3 cities, and we are leveraging the investment that we have made in the e commerce area to further accelerate our growth in China. Our China Innovation Center that was launched in 2010 has had some very good success. We have been developing new products that are specifically designed for the Chinese market. And I'll give you an example. Recently, we introduced a wastewater analyzer that was designed based on the feedback that we received from our customers in China.
And that has opened up about a $50,000,000 market for us in China. So our local technology development teams and the close relationships that we have with our customers in China are helping us in gaining share in China. I thought it would be good to share a specific customer example with you of a customer where it highlights the advantages of scale. So Wuxi Pharma is one of the largest pharmaceutical companies in China. Over the last few years, we have developed a strategic relationship with Wuxi.
The team at Wuxi values the depth and breadth of our products, Services and technical expertise. They are also benefiting from the productivity they are gaining by working with a single supplier Thermo Fisher Scientific, who can serve most of the needs that they have as a company. And it is due to The unique value proposition that Tom talked about earlier that we have been able to establish a company level procurement agreement with Wuxi that basically enables them to source everything from analytical instruments to lab equipment to production products to Consumables. So just a great story of how to leverage our scale and value proposition with an important customer in China. So I'm sure some of you asked that We have had good success in China.
And can that continue? And what is next? The answer is yes. We believe that China will continue to be a strong growth driver for Thermo Fisher in the future. Recently, the Chinese government introduced 13th 5 year plan.
And as many of you know that the 5 year plan is basically the government's road map for growth and investments. And we believe that the plan is very closely aligned with the strengths and the capabilities that Thermo Fisher have. And I will spend a couple of minutes just to highlight the key aspects of this plan. So not surprisingly, Innovation is one of the key areas of emphasis in their plan, especially in the areas of genomics and biotechnology. Healthcare systems in China will be upgraded in the future, and that is driven by the aging population and the Growing middle class in China.
One could argue that health care is actually becoming a national priority in China and that means that There will be a leap in progress in healthcare and they will do that by making investments in areas like precision medicine that I'll talk about in a few minutes. The 2 other areas of significant investments will be food safety, where they want to make sure that the supply chain for food is safe from the farm to the table and the environmental Industry will get some significant investments in the areas of pollution control in air, water and soil. So let me just reiterate that our strategy Is very much aligned with the 5 year plan. I commented on Precision Medicine. That is an area that was picked by the Ministry of Health As a key area of investment in the future, the government recently announced a $9,000,000,000 investment over the next 15 years, focusing on supporting the research and development in the precision medicine area.
And there, they will be working on areas such as pre and postnatal screening techniques, diagnosing cancer and the other chronic diseases that are prevalent in China. And that will be, to a great extent, leveraging technologies such as next gen sequencing. So based on what you heard from Alan, you can see that we will be in a great position to be a part of the support structure that they need to be successful in those areas. Healthcare and Diagnostics are The other areas where we expect to see double digit growth in the next 5 years here again, we're in a great position to be serving our customers in areas like allergy testing, diagnosing infectious diseases and providing a broad portfolio of products for the pathology labs. And here I'm going to take a pause and share with you a video with some comments from a Chinese customer, Doctor.
Hong, who is the Director of Huaxi Hospital in Chengdu, where we help them in building the largest clinical pathology lab in China. And he will talk about how our value proposition helped him in building a lab where almost everything was supplied by Thermo Fisher.
During the construction, we purchased many Thermo Fisher Scientific products for our R and D labs including ultra low
During the
quarter, I'm pleased that we have found your service team is very responsive. In addition, what made me feel satisfied Was that we both regard this as a partnership of academic communication, not only a business arrangement. So I believe this is a promising collaboration, which will ultimately push forward clinical diagnostic capabilities and pathological study in China.
Okay. So a good example of a value proposition to position our products in this lab. As a matter of fact, just as we speak, this lab is being inaugurated in the next about 48 hours. And John Kerry will be one of the people who will be there representing the U. S.
So it's a big collaboration. So let me just make a few comments on 3 other markets related to the 5 year plan. The BioPharma is in very great position to support that market in applications such as research, bioproduction, quality assurance, quality control. Food safety is where we already have a leading position in China with our multiple products, including the chromatography Product line. And this is where the Chinese government is going through some changes in decentralizing the food safety organization and building more labs at the provincial level.
And we expect to be a part of that and we expect to be not only in the labs, but also in some of the Field applications that are being developed to serve this market. And the last one is the environmental market, where again, we have had leadership position in China for many, many years, And we are expecting to further strengthen our position using the incredible portfolio of products that we have to serve this. So let me just switch gears to 2 other countries where we are seeing some Very good growth and we are gaining share by winning on some near term opportunities. So the first one is India, which is about a $3,000,000,000 served market and it is one of our best performing countries. Government is not there yet, but as they continue to work on improving the policies and the business practices, We believe that, that will lead to more foreign investments in India and that will result in growth in specific markets that we are targeting.
India today is one of the largest producers of generic drugs in the world. And we have the leading position in India working with the 1, the value prop that supports the pharmaceutical industry in India as we do. The other area I want to highlight is that the Indian government has announced that over the next 5 years, they would build about 120 food safety labs across the country. And given what I just mentioned to you in terms of what we have done in China, It will not be a difficult exercise for us to translate that success and help our customers in India. On the environmental side, One could argue that the pollution in India is as bad as in China.
It could be even worse depending on the type of pollution you like. But whenever I'm in India, I can tell you that I experienced some serious issues with my throat. And the Indian government is recognizing that and there are going to be some major regulations that will be introduced to make sure that They are reducing the pollution in the air, water and soil. The next market very briefly is South Korea, is $1,000,000,000 market. We've had some in South Korea with companies in the area of vaccine production and biosimilar drugs.
Companies like Celltrion and Samsung Biologics, They are our strategic customers. Our teams on the ground are working with them, supporting them with our value proposition. And we believe That in Korea, we will see the emerging market type growth even though one could argue that Korea is actually a developed market. One other thing I should highlight is that in Korea, the companies are very Internet savvy and some of the investment abilities serving our customers more efficiently in Korea.
So to wrap up, let
me just leave you with a few key Takeaways. We have the most significant presence in emerging markets in our industry that allows us to go where the opportunities are. We will continue to drive double digit growth in countries like China and India, while at the same time, we translate our successes from these countries into areas like South Korea and Southeast Asian countries where we are gaining share on a rapid rate. At the same time, we will make selective Investments in some of the evolving markets where we see some short term opportunities, but at the same time, we want to build our business there for the long term growth potential. And lastly, I just want to highlight that we are bullish about our growth in the emerging markets in the future, and we are confident that we will continue our successful track record here for many years to come.
So with that, let me introduce Mark Stephenson, who is going to use his business as an example to show how successful Integration and a solid strategy can lead to accelerated growth. Thank you.
So good morning, everyone. It's a pleasure to be back in New York and wrap up this morning's formal session with you. As you've hopefully heard this morning, we have a very clear strategy for Growth and a proven track record in delivering on those financial commitments. And so what What I'm going to do is just use that as an example of what we've done over the last couple of years in the Life Sciences Solutions segment and give you some examples of how that's played out. And secondly, I'll also look forward and explain why I continue to be excited about the opportunities ahead for this segment of our business and continued growth that you will see continued in the coming years.
So firstly, just to set the stage for you. So back in 2013, the Life Technologies business existed there, was A leading biosciences business but really had quite sluggish growth. The bioproduction side was a leader in one Specific area, which was in cell culture media growth. And then a broad genomics presence, but a lot of technical challenges and very aggressive across that area in next generation sequencing. Now Thermo Fisher was, at that time, a niche Player in Biosciences had a complementary area in bioproduction in the single use containers and very limited genomics offering.
And so by just bringing the 2 organizations together and acquiring Life We created really a leading position in life sciences. And as a result, the biosciences business is now growing significantly faster. We've created a very comprehensive portfolio in bioproduction and continuing to build out that portfolio and really taken a very focused approach to where we think the genomics portfolio successful and invested against So if you look at the actual results, so from where Life Technologies was in 2013, was growing 2% or did grow 2%. You can see the last couple of years, the acceleration in growth in the life sciences solution. We ended the year 2015 at 5% growth.
And during that time and now in the 3rd year, 2,006, we're on track to have delivered $300,000,000 in cost savings of bringing the two businesses together. This year, we will have completed driving $150,000,000 of revenue synergies and so really driven the financial benefits that were outlaid in bringing these 2 organizations together. During the time, we've also taken the opportunity, and I'll talk about some of these areas, to aggressively redeploy our investments to fuel further growth. And as you've heard the business model, we've taken advantage and positioned ourself within Thermo Fisher Scientific for an even brighter future. Now some of that has been with the commercial reach, and you heard from Tom Lowerweld the examples of this in the extensive Corporate account program, the use of the ultimate channel partner in Fischer Scientific And also the scale and size you just heard from Syed Jeffrey into the emerging and applied markets.
What we also have in the Life Sciences group is a very scalable operations and infrastructure that we're now beginning to scale and look across other areas of the company that we can take those assets and leverage them for further growth. So let me give you a specific example of something we did last year. So a year has gone by in the acquisition. We spent the time planning what we were going to do here. And so we started with the Fisher channel To take a portion of the portfolio, to give you an idea, we have about 50,000 SKUs in the portfolio, maybe slightly more.
To caportion, 14,000 SKUs, Well known products, leading brands, Givco Media, Applied Biosystems Thermal Cyclers, Vitrajet PCR products, for the first time in that portfolio. Up until that point, now very direct presence, you would argue quite a complete direct presence with a large Selling organization. But what we added to the reach was that, that portfolio then got An additional 1,000 plus feet on the street. It was complementary to what customers were buying other products in that portfolio from the Fisher channel. And we included in our corporate accounts program and now had access and better relationships with some of the leading pharmaceutical customers.
So if you just look at the products bought, we actually added 1,000 new customers that were started to buy those products that weren't buying before. And if you think of that, that was this was not a small organization before, so it was adding number of new customers. And for that set of SKUs, They grew in 2015 3x faster than historically they were, and this is a relatively mature Set of portfolios, this is not through innovation. This is just adding through the channel and seeing that acceleration of growth. And as we head into 2016, we're further enabling channel and with more products And greater geography as we go forward.
If you take The PPI Business System that Mark talked a little about and take that as a continuous improvement into productivity, Again, from a fairly mature start of continuous improvement within the organization, we took an initial focus on waste And inefficiency and taking that out of the system. And so these are discrete events when we then take a team into the operations or into other areas. And just during 2015, we did more than 1,000 of those events, 1300 events. And we measure the hard savings that come out of that in terms of productivity savings, and last year, more than $40,000,000 of hard Savings out of those projects, but also importantly, the dry store of revenue growth, we measure our customer satisfaction with the customer allegiance score, and that score went up by 13% during 2015 in part due to some of these new projects that we drove. And if we just take a typical example of projects.
So in California, in Carlsbad, in our operations, very mature product line, which we make protein gels, a Plastic slab with a media on it that we took the PPI operations into there, a product we've been making 10 plus years, Occasional cracking of the gel. And we took the PPI in, did several events. And what we were able to do was not only increase the customer satisfaction by reducing The cracking of those gels, particularly in cold weather. We took out $500,000 in scrap savings of gels we were rejecting. And then with the same operational footprint, we're able to grow with the business, and we've succeeded in growing that business 7% in the last year just by having the same footprint but with greater operational efficiency.
So it's really become ingrained into the culture of the operations and is really a culture of continuous So that's really what the integration was going on the last couple of years. And on the next part, too, We did strategy side to reprioritize and reinvest in our consumable franchise under a lot is under the brand of Invitrogen and Thermo Scientific. We think that consumable franchise and the research around it has a lot of growth opportunities, so we reprioritized to invest in that business for further growth. We also looked at the bioproduction area. The market is growing well, and we've invested both in capacity and also in redundancy, assurance of that our customers are demanding and wanting as they go into vaccine production, and so we've really positioned ourselves well for future growth.
We also looked at the next generation sequencing market. We like that market, but we also looked at our position in it and decided which were the segments we thought We could be successful in and where was the technology a good fit. And we refocused down into a clinical segment. We've launched 2 products, FDA waiver cleared PGM and now the Ion Torrent S5, the integrated system that Alan referred to, and really focus down, and that business has been growing very nicely for us. And also on the innovation side, Alan talked about some of the areas we've done, but over the last We've really increased the impact of our high impact products coming out of that innovation and really focused on where we're spending our research dollars.
In addition then, we started to look at acquisitions. We acquired ASI, and we just obviously announced in the Q1 Affymetrix, which I'll spend a moment on now how we thought about it. So in terms of Affymetrix, we saw this With the integration now largely complete, we have a strong strategic fit for Affymetrix with our Life Science Solutions business. Firstly, the microarray product line is still widely used across research applied. You had an example of A clinical cytogenetics application that Alan Sachs mentioned.
And so that's very complementary to the tools that we have across qPCR, Sanger sequencing and next generation that fits very well in there. In addition, Affymetrix has acquired eBioscience, a really leading supplier of Flow cytometry based antibodies, and that fits very well to our biosciences business. Now one of the things we now have in the Life Sciences Group is really scale in our operations and how we go to market. And so we're really able to take one of the companies, and Mark mentioned the large number of companies with Affymetrix as an example, that exist in our very fragmented industry and really put that very straightforwardly into our operations infrastructure, put it into our commercial channels. And so we expect by doing that to generate $70,000,000 in cost and revenue synergies by year 3.
So as I look ahead, I see many exciting opportunities that we're yet to realize for the business. To start with the revenue synergies that I talked about we achieved in 2015 as an example, we're really just starting to leverage more and more what products We're using the channels, what we can leverage with our customer, corporate accounts and those relationships and the scale in emerging markets. We're really just Starting to scratch the surface and many more years of goodness to come through that. As I mentioned, our operations, our IT and our commercial infrastructure was built in a way that it is Structure was built in a way that it is leverageable, it's centralized in many of the areas, and so we see opportunities to continue to drive through both in our PPI culture but also in our scaling, what other businesses we put into that to leverage that infrastructure that we built. And then finally, we see markets that are adjacent to where we are that we can invest with high impact R and D programs and build out further presence in those markets.
And I'm going to give you four examples of those to close out my presentation this morning. So firstly, the flow cytometry market. So the flow cytometry market is about a $2,000,000,000 market today. It's a market growing in mid single digits because it's very important if you're doing work like cancer research, immunotherapy, which It's growing very fast. Stem cell biology, you need to look at the cells individually, characterize those cells, sort those cells.
We had a very small position in this market through our molecular probe dyes franchise, which were used to image some of these Cells in a flow cytometer. But we can bring our strengths to making instruments to think about a full workflow of solutions. We also have leveraged our presence in our e commerce and our sales channel because we're visiting and talking to these customers to actually bring that together. So last year, we launched a tune NXT flow cytometer. And with the acquisition of Affymetrix with the eBioscience Flow antibodies, we've actually completed out now a full system across the dyes and the system and the flow antibodies, which allows us to take our position and grow into a substantial position in this very much adjacent life sciences market that we didn't really have a large presence in.
Another market, and you see the size, is it for In the research model, so in clinical diagnostics, the detection of proteins is still very much done by producing an antibody and growing that antibody and then using that to detect the protein. Now there's a Paper research note out in Nature, a scientific magazine about a year ago that actually analyzed and concluded that about 50% of the work done in research labs was dollars wasted because the antibody itself that's been used was poorly characterized And was all defined, so it was actually not detecting the protein they set out to detect. And here again, where we have the scale of Connections with the scientific community, what can we do about these challenges, how can we deploy our assets to it. So we were not only able to set up very easily a group of thought leaders to say, look, how can we address this problem of better utilizing research dollars? But also, as we come to characterize the antibodies, which is one of the challenges, use our tools in protein bar and mastery, and then use our web To actually create a destination of choice when people are looking for the right antibody, they're going to go electronically and come to a destination of choice.
This is a highly fragmented market, and we can really become the destination of choice for researchers looking for their antibodies. Now next generation sequencing, as I mentioned, we decided to focus in on a sub segment of the next generation sequencing market. We view it as growing very fast in mid teens. We see continued adoption for this because precision medicine drugs and cancer Need you to analyze the genetics of this. And the opportunity we saw is it wasn't necessarily the sequence of gene We actually take a very targeted set of genes that we know where the drug companies are targeting, sequence that in a panel and focus on the clinical oncology where it's an actionable result to what drug do I prescribe.
One other aspect we've done, and it's been very successful for us, is to partner with 2 major pharma on their drug and oncology pipeline. And those 2 pharma are now working with us to both take this system through to regulatory approval and also get their drugs approved So it's a very well focused strategy, and our business is doing very well in the clinical segment here. And finally, let me finish with bioproduction. So in the bioproduction side, as I mentioned, we had 2 leaders in the market in cell culture and in single use technologies, but we've added to those capabilities. We firstly completed the acquisition of ASI.
That added more technology in our single use and also an Assurance of supply, which was very important for some of our biotherapeutic customers. This market is growing very fast. It's a $5,000,000,000 plus market. The drugs have been successful in the market. Other applications beyond the initial biotherapeutics into the biosimilars, into the vaccines.
And so we just further strengthened our position here, the meeting at Intifex coming out with new products using our analytical capabilities to look for contaminants, to look across monoclonal antibodies, to use our chromatography expertise, to make Chromatography compatible with the biotherapeutics, and so really building out a complete suite of products in what is a very high growth market position for us. So in summary, we took the business model that you've heard about this morning and the M and A playbook and have successfully integrated Life Technologies in to Thermo Fisher Scientific and created really a market leader. The PPI business system is ingrained now into the culture of the organization's Continuous improvement and gives us opportunities to deliver on margin improvement going forward. We can implement this playbook into be it smaller companies ASI, be it Affymetrix and scale our operation, And we position for adjacent opportunities of market growth through internal investment that can also leverage our commercial channels. So I thank you for your attention.
And with that, I'd like to invite Mark Kasper up to open up the Q and A session for the group. Thank you, everyone.
So I think the morning gave you a great feel for the outlook that we have, our proven growth strategy, and our future plans and certainly, the depth of our management team. I always look forward as does the team to answering your questions. So raise your hand and Raff and Ken will bring the mics around and state your organization and your name.
Good morning. Derek De Bruin from Bank of America. Mark, obviously M and A is a big part of the future story. And I guess, can you talk a little bit I realize and appreciate that the market in tools is fragmented, but Yes, some of the other competitors have adjacent businesses. Danaher, for example, is a big dental business.
Could you sort of talk about when you look at your M and A opportunities, Is it focused on the life sciences market that exists today? Or are you potentially thinking about moving into other areas of health care? It's really sort of where is your main focus? Is it e booking it into different verticals
So Derek, thank you for the question. Our main focus is running the portfolio of businesses we have in a world class fashion and just continue to do a great job of serving our customers and driving market share gains. When we think about strengthening the portfolio further from M and A, it's really within that $100,000,000,000 market. So the market we're serving today, life science tools and diagnostics is where we're focused on. And just given how large the market is and how fragmented it is, as we look at over the next number of years, we see ample opportunities to continue to grow the company through a focus there.
And just one quick follow-up. So when you look at your 4% to 5 4% to 6% organic revenue growth targets, what's embedded in terms of GDP, NIH budget growth. Can you just give us some sense on what do you need these different things to grow at, these different segments to grow at from a macro perspective to get a sense What's the high and low end of it? Thanks.
Yes. What we're assuming is really the current environment, from a GDP perspective, Moderate global GDP growth and a moderate increase in government investments in NIH. And we obviously know the China plans. So those big drivers, it's a world that looks similar. We're not looking for any improvements in the environment to get there.
And then obviously, I always get a question, what could go wrong? A real bad geopolitical shock to the system would put you on the lower end of that range. But In a world that we're living in today with moderate GDP growth, that's the right 4% to 6% is the right growth range organically for the company.
Thank you, Derek.
Hi, Jack Meehan with Barclays. I just wanted to pick up where Mark left off with the bioproduction business. Could you just Maybe give us a feel for the competitive environment there and where you feel Thermo Fisher is differentiated? And then beyond that, just how much visibility does that give you into the low teens growth in biopharma?
Sure. So Jack, when you look at bioproduction, there are 4 main segments within it. We are the clear market leader in 2, which is the cell culture and the single use technology. Those are 2 businesses that are growing very rapidly, Very strong customer relationships. There are 2 other segments where we don't play in a very significant way, filtration and purification.
You don't need to play in all four to have very, very strong positions. So it's a business that gives a lot of visibility into good growth. It's closing in on a $1,000,000,000 business for us. It's a little less than that now, but growing rapidly. We also have a number of other technologies within the company that are very applicable to bioproduction.
So you're seeing us make investments of taking those technologies into the bioproduction realm, which will continue to propel growth. So really good market segment, and we're well positioned to continue that growth.
Great.
And then just one follow-up, the 40 to 50 bps of organic margin expansion that you're embedding, it feels Pretty reasonable to me. What level of reinvestment are you embedding in there? Is there any mix, more lab products and services that's impacting that? Just any additional detail would be great. Thanks.
Stephen, do you want to talk a little bit about margins?
What do I do with this? Am I on? Okay, good. Yes, when I think about the 40 to 50 basis points of expansion, it includes a continuation of the strong productivity levers within the PPI Systems are a continuation of that focus and no lessening focus there. There is reinvestment to be able to capture the 4% to 6% growth.
So kind of the R and D spend, commercial and marketing spend in particular. So that's kind of how I think about the range of outcomes. So And then in terms of mix, the fastest growing piece of our business over that time horizon is most likely to be Lab Products and Services segment, Which is unlikely to be expanding margins significantly. So that puts a little mix pressure on you and that gets to the 40 to 50.
Hi, Mark. Ross Muken from Evercore. So I was looking back in my thermal model, which goes back a long ways, and the business has done, I don't know, 15% to 17% Earnings growth for a very long time. But in that period, the equity value was a few billion or sub $10,000,000,000 for a lot of it, and obviously, it's grown up a lot over the last few years. What are the challenges now that you're this $50,000,000,000 behemoth At keeping similar growth rates, which are distinctly superior to not only your peer group but much of the S and P, is it really just a function of Yes.
The size of the industry and the fact you still have so many fragmented areas to move into and there's still a lot of targets in addition to healthy underlying growth. But what are the sort of challenges, I guess, that you face in terms of being able to hear sort of the sensitive points in that given the scale you already have?
Sure. So Ross, as I think about the business, the reason that we've been able to deliver That level of earnings growth over the last 10 or even last 15 years, but also our confidence in delivering it for many years to come is we have a great team. You got a small sample of it today, but when you interact with our 50,000 colleagues, you have an incredibly talented passionate team Let's focus on our customer success and our customers understand our competitive position and they want to do more business with us, right. So fundamentally, good markets, good execution, that really has delivered the strong past, but more importantly, the bright future. There are a number of ways you can deploy capital To supplement kind of that 6% to 9% underlying operating profit growth that Stephen outlined, we laid out our view on the most likely scenario, which is Continue the consolidation of an industry, but you have other choices in terms of return of capital and so forth.
So I think as I look into the foreseeable future, we see a very strong outlook from that perspective. And then risks are really geopolitical risk, right? If something goes slow growth world, it's not a life science diagnostics issue, it happens in a world, You grow slow a little bit as you navigate through that.
And maybe we were talking about before the chromatography markets. You didn't highlight it here In great detail, but I talked to Critical Therate. It's obviously local techs in the world, if not, I think, the largest. So maybe a little bit of Color on how you were able to take what was a somewhat subscaled Onyx platform as well as your own NLC And then grow that into something much better and sort of how given that's more mature obviously than the Life transaction, how we can sort of think about What you've taken Dionix and what it's become as an entire chromatography portfolio with what you also had prior to that.
How
we can think about That experience relative to what you're doing now in sort of genomics and biosciences and everything with life, etcetera.
Yes. So when we looked back, I guess, 4 a little over 4 years ago and said, Chromatography, as you said, is a large segment with good growth characteristics. And we, as a company, at that point in time, were a niche player. We had a small position in LC, a reasonable position in GC, and then obviously on the mass spec side, a very strong industry leading position. And we decided that We would be best off with an organic strategy supplemented with some technology.
So we did Dionys as an acquisition, and then put significant R and D dollars to work there. And we have gained share substantially over the last 4 years because of that. We bought a great software platform that came with Dionys. We leveraged our key capability in space. And today, We have great growth in liquid chromatography.
We have very strong growth in ion chromatography. And we've talked in the past about our momentum in gas chromatography across that portfolio. It's about a $1,000,000,000 business, that's growing much faster than the rate of the market. And it gives you a sense that when we think about the world, sometimes we buy A portion of a portfolio put it together and leverage our unique reach to the customer base to gain share. When we thought about Affymetrix, it was very much the same viewpoint, which is we like the fact that when we go into a customer that is working in the field of genomics, We don't come in and say we only have one solution to your problem.
We say what are you trying to accomplish? Is this a Sanger solution? Is this a qPCR solution? Is this a microarray solution or is this a next gen sequencing solution? And we actually optimized the workflow, which is where I think Alan did a really nice job of highlighting that.
And again, it's the same thing, right? We don't really project forward what we're doing, but we put our 2 technologies in a way together that the customer Spends their time saying here's the problem I'm trying to solve and then we actually come to them and say here's the optimal way to solve it because in a way we're technology agnostic, right. We're kind of the solution provider to whatever the customer's biggest problems are. Thank you, Ross.
Mark Tetko, Peterson, JPMorgan. On diagnostics, you've kind of maintained this view that you want to have leadership position in niche markets. There's obviously a large opportunity set to consolidate there. At the same time, reimbursement has been a real problem. For NGS panels, we've got PAMA coming, Flow cytometry got cut.
So can you maybe just talk about the balances there in terms of more consolidation in diagnostics and your willingness to take on reimbursement challenges?
Yes. So when you a way to think about our strategy, we've always said, we focus on the niches where the customer base sees it as a very sticky, high share, sort of technology. So when you look at our portfolio, they all have the characteristic that they are very important to the customer And we have a very unique position. And the reason that we've taken that strategy versus saying, hey, we're going to be the biggest diagnostic company is There's been reimbursement pressures when I started in this industry, which was in the diagnostic field for the last 20 years, right? It's just there's always some level Of the reimbursement challenges, the way we've thought about it is, we don't want to bear the brunt of that reimbursement challenge, right?
So we want to have very differentiated positions that our customers want to work with us on. And therefore, we have avoided the commoditizing segments of the market where customers can choose between all the different suppliers and the margins have gotten Compressed, we've actually picked a business where margins have been excellent. They've been stable. We've got moderate rates of growth and think it's a really attractive business. There's lots of M and A activity and opportunities for us in diagnostics, but they're really rifle shots.
There's an assay here, a platform there that fits and that's how we do it. So it's companies that the investor base would not hear as much about, but would look at and see that fits really well within the company. And that's been our strategy we've executed over a number of years.
And then if
I could just ask Stephen, one on financial, you talked about the expansion of 50 basis points, now you're talking 50 to 60. Can you maybe just walk through that change? Is it just you've already made a lot of progress and there's less headroom?
Yes. So the guidance last year in the model included Significant benefits from light technology synergies at the early start of that period. So at the back end of the long term model last year, we were talking about 40 to 60. So really the difference really is the little piece of mix on LPS, and then just for the reinvestment required to get to the 4% to 6% organic growth. That's really the combination between those two models.
Thanks.
Hey, Mark. John Groberg at UBS. I just want to focus on organic growth for a second. I think 3 years ago, I was like, well, maybe 3 of life and then it was like you took 3 off the table, it's going to be 4, now you're saying 5. Big picture, if you go back if you look at it, it looks like what's really driven that Growth has been the strength in the biopharma end markets.
So I'm just curious, if you think about the future, you mentioned a minute ago that you Don't assume major changes from a macroeconomic standpoint. Are you assuming similar growth in biopharma going forward? And if so, Why is that when if you look at global R and D spend and kind of global revenue growth in a low different in total?
Yes. So if If you look at the improvements in the rate of growth within the Life Science Solutions business, it's really been the strategy the team has been executing. The markets are clearly better than they were when we bought the business. And if you do the math on sort of how government spending has changed and what's happened in the biopharma market, I would say about one point of the improved growth outlook is just that the market is a little better. We kind of bought it at the bottom of the cycle.
But most of the improvement is Actually, the execution of a strategy was actually different than the strategy that the business was executing before. So when we look at the growth rates for that business, It should be in line with the growth rates for the company as a whole, and that really should be sustainable, right? It doesn't assume dramatically different end markets than what we're experiencing over the last couple of years.
And then if I could just one more on M and A. So on the AffyDale, you spent You know, dollars 1,300,000,000 or so for about 1% of accretion. I guess just generally, how are you feeling about valuations in today's market? And is there anything about from a valuation standpoint that you think could makes you a little bit less eager to do M and A than you otherwise would?
The F and A is quite a bit more Other than that, it's just in the 1st year was that level of accretion. But when you actually look at what year and year 2 year 3 is, you see a lot more accretion. When I think about the returns that we're getting on M and A, they continue to be very strong where you're getting double digit IRRs, you're getting Kind of ROICs in that 4 to 6 years in terms of above the 8.5% cost of capital. We are doing deals when we do them that we feel like we're going to generate very good returns for our shareholders.
Hi, it's
Steve Beshaw. Hi, it's Steve Beshaw, Morgan Stanley. We got a really helpful overview from Mark Stephenson on LSS. But early in your presentation, you mentioned that the change to the outlook in LSS is really the critical reason why you felt comfortable Changing the broader outlook for organic growth. So I want to circle back to it.
It'd be helpful to hear you reflect for another minute or 2 on why specifically you felt comfortable making that change, It's a powerful statement. It's not only we're observing faster growth, but it's that we anticipate faster growth. So could you talk us through Between the end markets and execution, maybe share gain, why it is you made that decision? And then within that context, sorry for a many parted question, What is it that you've seen happen in terms of execution and then again on share gain within LSS that gives you a view that this organization, And the acquired life assets in particular are really benefiting from being a part of Thermo and you're seeing more commercial success as a function of that collaboration.
So, the first thing is when we think about the organic growth outlook for the company, We're always a believer in not the promises of the future, but the realities of what we have the track record of delivering, right? So when we acquired Life Science Solutions, the business was growing around 2%. And we said, we're going to do we don't love 2%, but we think we can make it better, but until we prove that we can make it better, we're just going to do the weighted average impact on our growth rate. So back then in time, We took our company's growth from 4% to 6%, and we said, the math is just says 3% to 5%, right? And as we demonstrated That track record of improved growth, you've seen us move that 3 to 5 to 4 to 5 and now back to 4 to 6.
And that is purely the team Comes to work, everyone is focused on gaining market share and they're demonstrating it, right? So, really solid execution by Mark Stephenson and his team. And it has the business has a really, really bright future, right? If you look at the three pieces of that business, the biosciences has really benefited from the benefits of our channel strength and our corporate accounts presence. It's always had great technologies and it just now has a stronger commercial reach.
Bioproduction, As Jack asked a little bit about, really has good competitive position and when we combine what was Thermo Fisher in the Life Science Solutions businesses, and that has great growth outlooks. And as we have repositioned our next gen sequencing technology, and now That combination of really good execution and a little bit of a change in strategy gives us a really bright outlook there. Thank you.
Mark, Doug Schenkel from Cowen. First question, Quanta Horizon, as you hope you'd be willing to stretch the balance sheet on a pro form a debt to EBITDA basis. Is around 5x Kind of a good rule of thumb in terms of the limit of how far you'd go.
Yes. From a leverage ratio, We have a lot of capacity. I would say, in this environment, you wouldn't likely stretch past 4.5%, which is where we were. I think Stephen highlighted that you have the opportunity to, if something on the larger side of the equation was available to us. They don't happen that often, right?
They happen. Fisher Scientific was a big transaction, Life Technologies was a big transaction. Even those now will be bolt ons for us, right? So, our definition of bolt on is a broad range.
I guess my follow-up is on Teshan earlier today. One of the precision medicine examples he talked about in his presentation was On the move to use Ion Torrent next generation sequencing tools and neonatal screening, it's a pretty interesting market opportunity. So just a couple of questions there. Are there regulatory hurdles that would need to be addressed to replace existing neonatal screening protocols? And second, there's a pretty entrenched market leader in neonatal screening today that's not using NGS.
What would Thermo's go to market strategy be, keeping You do have a pretty big footprint today in the U. S, Europe and of course, China, an all important market for these types of tests.
So maybe Alan or Mark, you guys want to comment on that?
Yes. I mean I'll take your Question literally to be neonatal because we've also seen huge explosion prenatally, particularly in China. And what we did there, which did require regulatory Approval was partnered locally so that we had the 1st approved NGS Prenatal solution and have continued to do that and also have partners prenatally. In the postnatal situation, that's still an evolving Space, I would say from a regulatory setting, some of the panels we talked about were validation panels that we've done in emerging markets in Saudi Arabia specifically, and it's an adoption of panels. And Generally, we see that adoption continue, and it's a complementary tool postnatally to the odyssey that Alan refers So I don't think one replaces the other at this point, but there's a set of tools that get deployed in the postnatal situation.
Hi, Mark. Dan Arias from Citigroup. Just maybe to your point on LSS and taking growth from 2% to a level that I don't think many of us contemplated a couple of years ago. On Affymetrix, can you just sort of help us with what your organic growth assumptions are that are underpinning That business over the next couple of years?
Yes, we're expecting the business to grow around the company average over that period of time, so from an organic perspective.
And then can you maybe touch on CRISPR and the way that you're situated there? I think last year you established some collaborations. You were talking about maybe launching your own kits and sub licensing. I know that that's not a meaningful portion of revenue, but just keeping up with this idea of being on the edge of technology trends and to your point innovation, How are you positioned there? How meaningful could that be if things go well?
What about that?
The cell engineering space is actually a large focus for one of Businesses, and it isn't just a kit to change the sequence of a genome. It's the surrounding ability to look What happens to the cell after you change the sequence and the ability to show that only that sequence was changed. So it's an amazing market for us. It's over many different products across many different businesses. It's not just the CRISPR enzyme to knock out or change the sequence of a gene.
Hi, thank you for taking my question. Miroslava Minkovo with Stifel. Just going back to a lot of the questions that were asked earlier about your organic growth rate target. I appreciate that the Life business has And a lot better. But this year, your organic growth rate is 44%.
So just wondering from a divisional perspective, what do you think accelerates over the next A few years. And what would be the factor that could get you more towards the 6% rather than the 4% to 5% that we've seen historically?
Yes. So in terms of the organic growth outlook for the shortest term, the way we thought about it was We grew 5% last year, good strong growth. When we started out the year, we assumed 4% is what the starting We had a great start to the year. And we said, let's get another quarter behind us before we revisit the assumptions, just because Who knows what goes on in the world? But in terms of the fundamentals, we've now had probably about 6 quarters or so, 7 quarters, where you've seen really good growth in the market.
So you don't think there's a big changes in Analyst to maintain it. But like everything, we like to get through a little bit of the year to make sure that the momentum is going to continue.
Okay. And secondly, it was a very broad overview of innovation that's happening around thermal. You mentioned you need to step up some investments to move you towards that above market growth rate. Wondering if you could comment around the lines of healthier, cleaner, safer. What are some of the areas that you are prioritizing for the next few years?
And is there any way to think about where you might be sort of on the front?
Sure. So in terms of the investments, One of the things I think Tom Lowell did a really nice job of is framing how the businesses all fit together and work together, right? So, we have a very large specialty diagnostics business, which another way to think about it is, We're in every hospital lab every day. And what we're doing with our innovation is actually spending a very substantial amount of resources on taking what are traditionally life sciences tools and driving them into the clinical application. So mass spectrometry, next gen sequencing, those combinations, Those are our 2 biggest R and D investment areas when you look at that.
So those are the areas where you're seeing very substantial investments and that gives you A sense that longer term, they'll be big they are big growth drivers today, but there will be bigger growth drivers in the future as well.
Mark, we're going to take one
more question. Sure.
Hi, Mark. Jeff Elli from Baird. Can you give a little color on Uniti? It's been a nice business for you, maybe an update on the competitive environment. Where do you think we're in terms of penetrating the pharma base and then talk about some of the successes on the applied customer base?
Yes. So, our services offering, We have a very strong set of capabilities from our value added services and we use the combination of our channel business and our Large instrument business to have a very differentiated set of capabilities for our biopharma customers. It is a fast growing business, growing faster than It is a differentiator for the company and it's one that if I think about where the evolution maybe in a baseball analogy is probably in the 3rd or 4th inning in terms of adoption. So it will continue to be a strong growth driver for many years to come. So thank you for attending today.
We are, as you can tell, very excited about what our future holds. We have a proven growth strategy that positions the company to drive very attractive rates of growth into the future. That growth will translate into strong adjusted earnings per share growth, and we will be good stewards of your capital, making sure that we deploy it wisely to create shareholder value. We look forward to updating you on our progress in our next earnings call. And again, thank you for spending the morning with us here in New York City.
Thanks a lot.