Vice President, Investor Relations, want to welcome everyone here to our 2015 Analyst Meeting. Great to see a lot of familiar faces. Before we get started, I just want to go through a few scheduling issues and some housekeeping items. So as you see on the agenda, let me pull that up. We're going to start with the strategic overview from Mark Casper.
We're then going to go into our financial outlook with Pete Wilbur and Stephen Williamson. And then you're going to hear from some of our primary business leaders for a good update on what's happening in our four business segments. We're going to also have a short break right after the presentation that Tom Loewell will give on analytical instruments. Let me just make sure we're on the agenda. And then when we come back from the break, you'll we'll have a couple more presentations, and then we'll get into a Q and A session at the end that Mark Casper will lead.
When we get to the Q and A session, we ask that you if you have a question, please raise your hand and wait for microphone to be brought over to you. Then please state your name and your organization for the webcast. Also, because we are being webcast, please ask conference call. Various remarks that we may 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 by these forward looking statements as a result of various important factors, including those discussed in the company's most recent quarterly report under the caption Risk Factors, which is on file with the Securities and Exchange Commission and available on 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 representing our views as of any date subsequent to today. Also during the presentation today, we'll be referring to certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP, including adjusted EPS, adjusted operating margin, adjusted ROIC and free cash flow. Definitions of these non GAAP financial measures. And for historical purposes, a reconciliation of these non GAAP financial 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 Mark Casper, President and CEO of Thermo Fisher Scientific.
Well, good morning. It's great to see you and great to have everyone here. What I would say is, 1st, I'd like to welcome our Board of Directors who is with us today and have been with us in years past as well, as well as the members of the management team. Today is a great opportunity for the company to give you an update on the progress that we've made in executing our strategic objectives and talk about the very bright future that we have as an organization. I'm going to set the stage this morning, as Ken said.
And then from there, Pete and Stephen will go through the financials and then our business leaders will hit the highlights on why we're so excited about our growth prospects going forward. As I get started, I'm going to spend the first few minutes Talking a little bit about where we are today as a company. And then from there, what I will do is talk about our future. I think it's good to start with an orientation slide just to ground you on Thermo Fisher. For most of you, it will be quite familiar.
We are the industry leader in our field. We have a unique scale in terms of 50,000 colleagues working across the globe, serving customers in 50 countries. We have $17,000,000,000 in revenue with an unparalleled commercial reach. The size really gives you a huge advantage, particularly in the high growth regions of the world, the emerging markets. We go to market with 5 leading brands, Thermo Scientific, Applied Biosystems, systems, Invitrogen, Fisher Scientific and Unity Lab Services, some of the most powerful in our industry.
And we're known by our customers for our unmatched depth of capabilities, whether it's the leading innovation that we drive in our industry, the deep applications expertise and very interestingly, substantial productivity that we are able to deliver to our customers that are trying to really get the most impact out of their R and D dollars. We enable our customers to make the world a healthier, cleaner and safer place. And the video, I think, gives you a good sense of how we work in the world today. When we think about our customers, we serve incredibly exciting and dynamic markets. In fact, our served market is about $100,000,000,000 And that market is growing by 3% to 5% on an annual basis.
And we believe that those are reasonable assumptions in terms of market growth going into the future. The reason that we have such confidence in that type of growth is really driven by what our customers are working on. In Pharma and Biotech, looking for the cures for cancer. In academic and government, we provide the tools to solve some of the most challenging research problems. In the industrial and applied markets, really serving the quality control applications to make sure that what is produced is what companies are trying to produce.
And then diagnostics and healthcare, bringing out cutting edge new diagnostics to help doctors get the right treatments for their patients. Our end markets are balanced in terms of The four markets that we serve, they're all attractive. And you know our positions in each. I always like to highlight our position in pharma and biotech, where we continue to gain share, growing well above the market rates of growth. And I'll highlight that a little bit later in the remarks.
We have 4 business segments. They're highly complementary. They add to one another, and they really propel us as the industry leader. Our Life Science Solutions segment and business, 25% of our revenue 2nd and very incredible capabilities in terms of serving the biosciences, bioproduction and the genetic sciences space. Mark Stevenson and Alan Sachs will give you an update on some of the things we're working on as well as
the very attractive growth prospects that we have in the
business and share some growth prospects that we have in the business and share some thoughts about how, as we're in year 2 of the integration, how we're doing there as well. Innovation is important to Life Science Solutions. It's also important to our analytical instruments specialty diagnostics businesses, which represent about 40% of the company combined. And Tom Lowald and Andy Thompson we'll highlight some of the areas and some of the things that they're excited about in terms of innovation. And then finally, Lab Products and Services.
37% of our revenue, the industry leader in driving laboratory productivity for our customer base. And it is the commercial glue that really drives our share gain around the world. And Alan Mallis and Greg Herrima we'll give you an update on our unique customer value proposition, how it's resonating with our customer base and the new customer base that we are targeted to focus on as well. So the businesses are attractive. They're industry leaders in their own right, and they add to one another.
This slide is one that I always like to show this one. It's us looking back at our track record. And it's one that has taken an incredible amount of hard work by the 50,000 colleagues across the globe to deliver this. And we have delivered very strong financial performance historically, whether you take a 5 year period or a longer period of time. Over this 5 year period, 13% revenue growth.
We were able to take that top line, expand our margins on average of 110 basis points a year, finishing last year at about 22% operating margins. The combination of good revenue growth and that margin expansion as well as disciplined capital deployment has led to 19% compounded annual growth rate in our adjusted EPS. All very strong financial measures in terms of our income statement. While we deployed substantial capital over that 5 year period. We were still able to improve our ROIC, improving it by 20 basis points and 9.5%.
As Stephen will go through a little later, we over $20,000,000,000 of capital in that period of time. So it gives you a sense that in the discipline that we have. I think the historical track record plus what you'll hear today about our exciting growth prospects gives us great confidence why our future is so bright and that the next several year period looks incredibly attractive from a financial perspective as well. The last of the slides I want to use in terms of looking back is an update on the Life Technologies integration. When we deploy capital, we're very focused on creating value for our shareholders.
The criteria, as you know, is strengthening our strategic position, clearly helping our customers and generating strong returns for our shareholders. We've owned Life Technologies for a little over a year. We plan that acquisition. We had about a year to plan it as well. So it's very well ingrained in the business.
You'll be familiar with the slide here in terms of the concept of what we put in the deal model when we announced the transaction, what was the upside case that we articulated a year ago in terms of what we would be driving towards to exceed the return on invested capital targets. And last year, we gave you an update on the cost synergies and the revenue synergies saying that we're well on track to deliver the upside case. In fact, you'll hear more about the cost synergies from Pete in terms of how we're doing and why we're able to increase our year 2 target this year and feel good about the momentum there. On the revenue synergies, we spent last year planning them. We've been implementing them this year.
And we have good momentum in terms of capital capturing $60,000,000 revenue synergies this year, driving $20,000,000 of earnings and putting us in a position to capture $150,000,000 of revenue synergies next year. And you get a sense of the work we're doing with our customer channels group or our Fisher Scientific channel. The work we're doing is well across our Specialty Diagnostics business, team, all helping to drive growth for our Life Science Solutions business. Organic growth. When we showed this slide last year, we said it's too early to declare the upside case and in the fanciest graphics I can do.
We have a high degree of confidence that we will drive to the upside case as well here. From our perspective, we delivered 4% organic growth in this business last year. And when we look at what we're assuming in the long term financial model, we're assuming 4% at this point and feel that we're well positioned to do that. We're not stopping there. We continue to focus on innovation, leveraging the commercial capabilities, but feel that we're well on track So let's look to the future.
This vision should look very familiar to you. We presented it first at 2011 here at an Analyst Day, and it's what we're working on for the long term as an organization. These are the things that really set our long term strategy from a colleague perspective, becoming one of the world's most admired companies. As an industry leader working with customers that are focused on making the world a healthier, cleaner and safer place, we have to have the best talent, both recruiting it and retaining it. And being an admired company is very much part of that.
We're constantly focused on advancing our position as the industry leader, whether it's the investments we make internally or the moves that we make to strengthen the portfolio, we are always thinking about the chessboard that we're playing on and how do we shape it to create value for our customers, our shareholders and continue to strengthen the company. We invest substantially in our brands to make them the most powerful in our industry as well as in our technologies that will make a profound impact on the life sciences, health care and on the environment. We continue to increase our presence in high growth emerging regions. And financially, the thing that we're very focused on is really delivering consistent and strong earnings growth. And that is adjusted EPS growth really is the primary measure that we've been focused on.
And you know what our proven formula is in terms of how we do that. And it's done by 3 key things: organic growth our practical process improvement business system and disciplined and effective capital deployment. In terms of organic growth, the 3 drivers are high impact innovation, our unique customer value proposition and the scale that we have in emerging markets that makes it very rational for our customers to do more business with us. PPI business system takes top line growth and turns it into expanding margins and improving cash flows. And you'll get a sense of that from both the impact from Pete Wilbur as well as Tom Lowald in terms of how our PPI business system creates a bright future for the company.
And then finally, capital deployment. The combination of strategic M and A and return of capital is the 3rd element driving our long term consistent earnings growth. And between myself and Stephen Williamson, you'll get a sense of how we're going to play that out and some of our priorities. That translates into a very bright financial outlook. And what I wanted to do is hit some of the highlights, if you will, on how we think about the period of time through 2018.
And then Stephen will go into a lot more of the assumptions a little bit later this morning. The first thing that we did was kept same time frame as we did last year to make it easy from a comparison standpoint. And we'll give you a sense of that a little bit later. When you start with the revenue side of the equation. The first thing that has changed is the growth rate, and this is the organic growth rate over this period of time, 4% to 5% versus the 3% to 5% that we talked about last year.
And we feel confident in our ability to deliver 4% to 5% organic growth simply because as you look at how the Life Science Solutions segment is performing and the bright outlook that it has, we feel that in normal market conditions, the 3% growth rate is off the table. So that is something that we feel highly confident about. When you look at the earnings side of the equation, starting with the no M and A case, which is using the same basic assumptions as we used last year in terms of leverage. You'll see that the numbers in 2018 are roughly the same exact numbers that we showed last year, with the exception that we're able to offset a $0.70 FX headwind that has transpired since May of last year. And Stephen will walk you through that.
So that's the second aspect of it. So a high degree of confidence in our ability to deliver very strong earnings And then the third thing was to try to help quantify what would bolt on M and A add to that. And using the 2.75x leverage, which is the midpoint of our target leverage ratio, that adds about $0.75 in 2018 of EPS or about 3% to the CAGR. So I think that gives you a sense of the 3 key things: what's our view on organic growth how has FX affected the numbers, how to think about capital deployment and driving our long term financial outlook. So how are we going to do that?
Starts with the top line. And I think you'll come away with a great sense during the day of why we're so confident in our ability to deliver 4% to 5% organic growth. From an innovation perspective, we invest $700,000,000 a year and we focus on 2 things, enhancing our market leadership and secondly, creating the exciting new opportunities or next opportunities for growth. When you think about leadership, you can think about mass spectrometry, whether it's the Orbitrap Fusion on the high end or for more of the applied markets, the QXACT to focus, whether it's the really great new products we launched in QPCR earlier in April to really grow our very large QPCR business. Those are all examples as well as our new chromatograph in terms of the Vanquish in terms of strengthening our market leadership.
There are many areas in terms of creating the exciting new opportunities as well, things like our portable instruments, which we've built out a leadership position. And I thought what I would do is highlight three examples from our Life Science Solutions segment some of the things we're excited about. The first of which is in the area of clinical oncology. And in all three of these, you'll hear from Alan Sachs and Mark in more detail. But in the area of clinical oncology, our next gen sequencing products are very well suited to serve this customer base.
The amount of sample DNA that you need to get a relevant result is the best in the industry, and that has given us great momentum in serving that market. And the Oncomine Focus assay is one of our flagship products in terms of driving the growth. The second area that's a very big opportunity for the company is in flow cytometry. It is a large market, a market with good growth. We are a small player.
We've invested substantially in bringing out a great new technology, which is the Attune NXT. We've launched it this year. It is a much faster, easy to use, affordable flow cytometer. The product is so exciting that after the product was demoed at one of our key customers, the customer actually reached out to me and thanked me for bringing this product to market, which gives you a sense. That's a pretty unusual for one of the customers at the bench level to reach out to the CEO and say this thing is unbelievable in terms of what the impact is.
And we believe that we will redefine flow cytometry and become a more relevant player in that field, a really good growth opportunity. And the 3rd area, and I was reading the pre Analyst Day reports from our great analysts. And one of the things I was laughing about was a quote from a buy side investor that said, mention the cloud 3 times and you'll help your valuation. And unfortunately or fortunately, this slide was put together before we got that feedback. And I can tell you for sure that we didn't put cloud computing on the slide to change our multiple.
But we do have a very big initiative in terms of the Thermo Fisher cloud. You'll get a very specific example of how industry leadership really makes a difference in terms of using scale to have a much better experience from the customer base and how the cloud helps enable that. So we have a very large installed base of genetic systems instruments, and our customers who are able to use that and use the cloud to actually get more valuable information. And I think you'll get a sense of why we're so excited about that. 3 great opportunities for growth for the future: oncology, flow cytometry and the use of the cloud.
2nd driver of growth is our customer value proposition. The chart looks should look familiar. We've maybe shortened up the graphics a little bit. But we focus on our customers, and we drive innovation for them and their productivity. And we launched this value proposition after the creation of Thermo Fisher Scientific.
We started with large biopharma customers using this. And over the last 5 years, for example, we've been able to have an 8% compounded annual growth rate serving that customer base, which gives you a sense of much faster than the rate of market in terms of the adoption. Over time, we have expanded the number of customers that we have applied this value proposition to. And Alan Mallis will give you a sense of our newest target customer base in terms of the academic small and midsized biotech customers that are finding this very relevant as well. So lots of good feedback on our value proposition, continues to drive substantial share gain for us, and we feel well positioned as our second of our key growth drivers.
The third of our top line growth drivers is emerging markets. We have 18% of our revenue in the high growth regions of the world. And you know our success in China. Over the last 5 years, we've averaged a 30 plus percent growth rate, building out a $1,200,000,000 business today. When you look at the success there, we've had lots of lessons learned over the last 10 plus years.
We've been applying those lessons 2 other parts of the world to really take advantage of them. Just in the last month, we've had significant new openings in the Middle East of our customer demo center as well as in Brazil in our customer experience center where we've had a substantial number of customers come and interact with the company looking at our new capabilities, positioning ourselves for the long term in both Brazil and the Middle East. The other aspect of emerging markets is when we acquired Life Technologies, Life Technologies had a very complementary set of strengths to where Thermo Fisher was, particularly with great strength in Korea and in Southeast Asia. And I thought I would use Southeast Asia to look at how we're leveraging that set of capabilities in Southeast Asia. And we have 1,000 employees serving the region.
We have a very large capability in Singapore serving as our Asia headquarters. And when you look at it commercially, it's a $2,000,000,000 market for us. It's growing at 7%. We have about 15% market share and feel very well positioned to really create an experience for our customers that makes them really want to work more with us than anybody else. The way we think about our emerging market strategy is that we want it to be rational for our customers to continue to grow their business with us at the expense of others.
And that's why we've had great success by having better supply chain, better people, local manufacturing, local R and D, applications labs, using our scale to create competitive advantage. And that's what we're doing in Singapore. And you'll get a sense from Tom Lowold how our instruments business is leveraging the capabilities that Life Technologies brought to the company Let me turn to capital deployment, which is also a significant driver of our attractive and bright financial future. First, a quick update on what's going on in 2015. We've been active.
We bought back $500,000,000 of our shares. We acquired Advanced Scientific in February to build out our bioproduction capability, and we continue to delever as well with our goal of being down at our target leverage ratio under 3 by the end of the year. When you look forward to 2018, we have about $15,000,000,000 of capital to deploy over that period of time. And as you look at the model a little later, you'll get a sense of the assumptions that we've made. About onethree of our capital is assumed to be a return of capital to our shareholders, primarily through buybacks but also through a dividend that will be growing modestly over that period of time once we hit our target leverage ratio and about $10,000,000,000 of M and A over this period of time.
And bolt on M and A, a steady cadence of adding to our capabilities. Our criteria, as I said earlier, is the same, strengthens our strategic position, enhances our customer offering and clearly creates shareholder value. So we will continue to be very active in taking the very strong cash flows that we generate and have substantial capacity to deploy that and create additional shareholder value. There's obviously scenarios that are more aggressive than this. We've obviously been willing to go above the 2.75x leverage ratio over short periods of time like we did with the acquisition of Life Technologies.
And should the right opportunity materialize, we obviously don't feel constrained to stop at this level. But we think this is a good baseline assumption as you look to the future. So let me close my part of the presentation this morning with one last slide that I think highlights the day. And that is when you look at Thermo Fisher Scientific, we are the unrivaled industry leader serving a large, a fragmented, growing attractive market. We are very well positioned in that market as the industry leader.
Secondly, we have a strong track record of delivering outstanding financial performance proven growth strategy as well as our PPI business system. We're positioned to deliver 4% to 5% organic growth over the period and achieved 25% adjusted operating margins over the planning horizon. Our earnings and free cash flow and the growth that it's providing will provide about $15,000,000,000 of capital to deploy through 2018. And we come to work every day continuously our position to accelerate our growth and create shareholder value. So before I turn it over to Pete Wilbur, our CFO, I wanted to acknowledge that this is Pete's last analyst meeting as he's retiring in March of 2016 and handing over the CFO reins to Stephen Williamson on August 1.
Pete has been and continues to be a phenomenal business partner. He has contributed enormously to our success in everything that you see in terms of the progress that we've made over the last 15 years as a company. And part of that contribution is also in the fact that he developed his successor, Stephen Williamson, who will carry on the tradition of having a world class CFO at Thermo Fisher Scientific. With that, I'll turn it over to our CFO and my friend, Pete Wohr.
Thanks, Mark, for the kind words. It's truly been a great run and watching the video really brought home to me how far we've come together with everybody in the front row here. So I know that I'm going to miss being part of such a great company and working under your exceptional leadership, but it's not over until it's over. I got a little more than 2 months in the chair before I hand it over to Steven. And I don't plan on taking my foot off the gas anytime soon, not that I think you would allow me to.
So good morning. It's great to be here to give you a detailed financial overview of Thermo Fisher Scientific. As you can see, the title of our presentation is Consistently Delivering Shareholder Value. We chose that title because it's something that we take very seriously and then give you some insight into how we plan to achieve our 2015 financial goals. And then I'll invite up Stephen to cover our longer term financial outlook for the company, which I think you'll find pretty compelling.
So with that, let's begin with a quick recap of 2014. So although it's somewhat old news, our great financial results in 2014 provide a good base for how we're thinking about 2015 and beyond. On the top line, we grew revenue 29% on a reported basis, our key end markets and geographies and successfully integrating one of the largest acquisitions in our history. We significantly leveraged that top line growth and generated 2 40 basis points of adjusted operating margin expansion. And of course, the acquisition was a big contributor to that, but we also once again contributed strong productivity from our PPI business system, Which I'll expand upon a little bit later.
This all resulted in 28% adjusted EPS growth Above the high end of the original guidance we gave you at the beginning of last year. So overall, I think you'll agree we delivered strong strategic and tactical execution last year. Given the significant borrowing that we did financial Life Technologies acquisition. I wanted to take a minute to update you on our progress in delevering. At the end of Q1 last year, following the acquisition, We had $17,400,000,000 of debt and we were levered 5.7 times.
At that time, we committed to you and the rating agencies That we would aggressively pay down our debt and we did exactly that. We ended the year with $14,600,000,000 in debt 2.6 times leverage. We plan to continue to pay down debt this year and still expect our leverage ratio, as Mark said, to be at or below 3x by the end of the year. In addition to paying down debt, as Mark said, we already deployed $800,000,000 of capital at the beginning of the year, $500,000,000 on share buybacks and $300,000,000 on the ASI acquisition. And Stephen will be talking about our capital deployment strategy in a little bit more detail later.
I know all of you are very familiar with our legendary revenue pie charts. This is Ken's favorite chart. So let's take a quick look at our last 12 months profile. On the left, you can see our split by key end market. We remain pretty balanced among our 4 end markets, with a little bit more exposure to pharma and biotech given our strong growth in that segment over the last several years.
And with the full year of the Life Technologies results in the numbers, we've seen a little bit of an increase in academic and government, and With about 3 quarters of our revenue in consumables and services, about half of our service revenue comes from our biopharma services business, where we help our customers with clinical trials logistics. And then finally, on the right, we continue to invest in emerging growth markets 2nd question in Asia Pacific, Eastern Europe and Rest of World to enhance our overall growth profile. As you saw in Mark's presentation, emerging markets 2% represent about 18% of our total revenue at this point. So moving on to our full year 2015 guidance. These are the key assumptions we used in our guidance that we provided you on the Q1 earnings call in April.
They're here for your reference, and I won't go through them at this point Since I cover them in a lot of detail on the call. But it's important to note that we don't have any additional capital deployment other than dividends included in this guidance, Other than the $800,000,000 that we already spent on share buybacks in the ASI acquisition in Q1. So if we were to deploy any additional capital this year, that would be upside to our current guidance. So this is a summary of our full year guidance. The headline numbers are 4% organic growth, 60 basis points to 80 basis points of adjusted operating margin expansion, dollars 2,600,000,000 of free cash flow and an adjusted EPS range of $7.25 to 7.40 4% to 6% growth year over year.
At the beginning of the year, we said we would attempt to mitigate the bottom line impact of any incremental FX headwinds and that we would allow any tailwinds to fall to the bottom line. So we're executing to that plan and actually raised our full year 2015 adjusted EPS guidance in April, despite realizing an incremental $0.09 headwind from FX. We accomplished this through a combination of things. First, we implemented some operational improvements in terms of productivity and incremental synergies. We increased our capital deployment and took some below the line actions that more than offset the incremental $0.09 It's actually a great example of how we actively manage the company to meet our financial commitments.
A little later, Tom Lowell will talk in his presentation about in our current guidance. To summarize, based on April FX rates, FX is lowering our revenue year over year by 6%, diluting our adjusted operating margin by 65 basis points and creating a $0.67 or 10% headwind to our adjusted EPS. So on an FX neutral basis, our full year 2015 adjusted operating margin expansion would be 130 to 150 basis points And adjusted EPS would be growing 14% to 16%, so very strong underlying operating performance. So to better understand the components of how we expect to achieve our current guidance, Let's take a look at our 2015 adjusted EPS bridge. You know I had to put a bridge in my final presentation.
Starting on the left, Inflation is consistent with prior years. And I've already talked about the significant impact of FX, which is striking when you see here it graphically. We're driving some good below the line favorability through our tax planning as well as lower interest from delevering. And we continue to make strategic investments in the business to drive future growth, which are dilutive in the short term, but as we've seen in our past results, Drive sustainable long term growth. Price volume and mix is a significant contributor to our adjusted EPS growth, 2nd quarter results driven by pull through on our organic growth.
And we're also expecting a slightly higher contribution from price this year, primarily as a result of the actions we're taking 2nd quarter results to mitigate the impact of FX. Net productivity and acquisition synergies combined are the largest contributors to our year over year growth. And I'll provide some detail on our productivity cost drivers as well as the cost synergies on the next two slides. And then finally, in terms of acquisitions net of divestitures, We benefit $0.09 from picking up January results for Life Technologies, which was the last month before the 1 year anniversary of the acquisition, And adding the ASI acquisition, partially offset by the Coal Parmer and acquisition related divestitures that we did last year. The net of all this is year over year adjusted EPS growth of 4% to 6%, driven by strong operating results.
So now let's take a look at
our PPI Business System. Mark talked to you about how we deliver top line growth. Our PPI business system is how we improve our quality, increase our customer allegiance and drive margin expansion. It's a proven strategy that will continue to contribute to our results year after year. We're expecting about 330,000,000 PPI continuous improvement projects are the core of the business system and they represent about 50% of the savings.
These projects help us deliver highest quality products and services to our customers and remove waste and inefficiency from our processes. Even though we've been doing this for a very long time, there's always room for improvement. So we have a long runway here. 2. In our Life Sciences Solutions segment, we continue to be very focused on delivering acquisition related cost synergies, 2, which are detailed on the next slide.
At the same time, we're continuing to agrain the PPI process into the acquired businesses, and it's 2nd quarter results. It's great to see the momentum here and the contribution it's making to margin expansion And how the business is run. Moving to Global Sourcing, we're expecting about $100,000,000 of gross sourcing savings this year. Indirect spend with fewer suppliers to leverage our scale and achieve lower costs 2, as we grow organically and through acquisition, We're able to further leverage our scale. And 3, we continue to expand our supply chain into low cost regions.
Next, most of you know our manufacturing facility footprint remains quite fragmented. Despite our facility rationalization efforts over the years. We're still operating in 143 manufacturing facilities worldwide, which is many more than we need. We've consolidated over 90 manufacturing facilities over the past 10 years, so about 8 to 10 per year. And our expectation is that we'll continue that every year for the foreseeable future.
As we continue to make future acquisitions, our number of facilities will obviously keep increasing. So So I think you can see that we'll continue to have plenty of opportunity here for a long time to come. And finally, suppliers, which is included in the global sourcing bucket. This year, we're expecting our low cost region manufacturing revenue to grow to 11% of the total, The Life Technologies acquisition cost synergies are a great story. We're coming off an excellent year in 2014, where we exceeded our initial full year guidance by $30,000,000 or 35%.
This year, we're driving to $125,000,000 of incremental benefit, which is up $10,000,000 from the initial guidance we gave in January, driven by accelerating some of the synergies to earlier in the year. The cost synergies come from 4 major buckets 2nd quarter results and each with a slightly different pacing profile as you can see here. Generally, corporate and public company synergies come out quickly. We achieved almost half of the savings last year in year 1 and expect to realize about 80% by the end of this year, year 2. Business cost overlaps take a little bit longer to implement and include combining common business processes in biosciences and bioproduction as well as leveraging our combined functional support costs like HR, Finance and IT.
We're a little more than halfway through this process and expect to be about 80% by the end of this year in this category as well. Sourcing has a similar progression to the business cost overlaps and represents the savings we're achieving from incorporating Life Technologies into our global sourcing programs. This includes leveraging our spend across our larger combined scale and it can encompass anything from direct materials, the shipping costs, to our IT spend. And then finally, site consolidations And manufacturing synergies take the longest to plan and execute. And you can see here that we realized only about 20% of the expected benefit in year 1.
This category involves optimizing our manufacturing footprint and integrating our supply chain to increase our efficiency in manufacturing, warehousing 2 and distributing products in the combined businesses. The result of all this is that we should be in a great position to meet our year 3 goal $300,000,000 of run rate cost synergies. So now I'd like to introduce Stephen Williamson, 2, our Vice President of Financial Operations and my successor, as Mark said, effective August 1. It's personally rewarding to me and reassuring as a shareholder myself to have someone like Steven in my succession plan to become CFO. We worked together for over 15 years.
And over that time, I watched him become an exceptional finance leader and business partner. He knows the company's operations as well as anyone, and he's been behind the scenes, but he's been an integral part of our success. So he's an ideal choice for the role. So with that, I'll invite Stephen up to cover our 2016 2018 financial outlook. Thank you.
So thank you, Pete, for those really kind Thanks for all of the mentorship and development that you've given me and positioned me to be able to take this role in August. And it's just you've So good morning, everybody. I'm going to take you through 2 topics today. I'm going to start with capital deployment and then take you through our long term financial model. So we've been very active in terms of capital deployment over past 5 years.
We've deployed $25,000,000,000 and $21,000,000,000 of that capital has gone towards acquisitions. As Mark said, as you think about the scale of the M and A deployment, it's impressive that we've still been able to increase our adjusted return on invested capital over that same time period. We do that by having our operating businesses fully focused on thinking about where's the best place to put their investment dollars Where will they get the best return? From large investments such as acquisitions through to small investments like a fixed asset purchase at one of our manufacturing sites, for example. So good focus on return on invested capital and really strong deployment of the great strong balance sheet that we have And the strong cash flows that we have has created a lot of shareholder value in the past with our capital deployment strategy.
And given that we operate in a very fragmented industry, We see a good line of sight to a large amount of acquisition activity in the future. So I think you'll see a similar level of capital deployment going forward. So as I transition now into the long term financial model, going to start the bulk of my discussion is really going to be around a no M and A case. So whilst there's a lot of potential to do this capital deployment, wanted to model on the same basis that we've given you in the past so you can compare the 2. And at the end of the presentation, I'll give you more details around that upside that Mark mentioned, if we deploy capital in a manner similar to the way that we've deployed capital in the past five So moving on to the assumptions of the model.
And I draw your attention to the time period first. So this is a 3 year financial model, 2016 to 2018. And from the same time period as the model did last year, so A bit later on, I have a bridge of the EPS range from the 2018 model last year to the 2018 outlook this year. So getting to the assumptions, 4% to 5% organic growth over the 3 year time horizon. And as Mark mentioned, we had a model of 3% to 5% 2 year.
But 1 year further on with the integration of Light Technologies, we feel much more comfortable about growth in this range for the long term. Moving to adjusted operating margins. Over the 3 year period, averaging 75 basis points of adjusted margin improvement, slightly higher at the beginning of the period and then exiting at 40 to 60 basis points. So we still see we have a long way to go in terms of expanding margins for the company. So how do we get that growth and the margin expansion?
Well, it's that same proven formula that Mark talked about earlier on. It's the 3 growth levers that we see and have a long run of success ahead for them. And then our PPI Business System, which has Being such a strong driver of our productivity in the past, we see that having a lot of legs going forward as well. So feel very comfortable about the revenue range 2 and adjusted operating margin range. In terms of free cash flow, the businesses generate really strong free cash flow.
But one of the other levers that we have at our disposal is a very talented tax and treasury team that enable us to minimize the tax cost for the company. When you think about modeling in the tax impacts of a long term financial model, particularly with no M and A, The incremental adjusted operating income dollars come in at a higher marginal tax rate than the 14% that we enjoy on average across the company today. So there's general pressure in terms of the tax rate over the planning horizon. But again, 1 year further on in understanding the capabilities that we bought with Life Technologies, we put in place some good strategies and planning to be able to minimize that increase in tax. It's Still a slight increase over the period, but it's not a significant increase over time.
And then since the capital deployment, so this is the no M and A case, delevering down to a relatively conservative 2x leverage, so well below where we need to be to maintain our investment grade rating. And so this is basically the same set of assumptions that we used in the model last year for consistency. Dividends increasing approximately the same as the organic growth rate And then all the rest of the capital being deployed towards buybacks. So what does that get us? Well, here, For reference purposes, I put the midpoint of our 2015 guidance, then the 2018 ending point for the financial model And the 3 year averages and CAGRs on the right hand side.
So in terms of scale, dollars 18,700,000,000 to $19,500,000,000 revenue by 2018. Adjusted operating margins, approximately 25% and then really strong EPS adjusted EPS growth over the 3 years, averaging 8% to 12% each year through that 3 year period, ending in 2018 in the range of $9.20 to 10.30 Free cash flow, as I said, strong free cash flow generation of $3,200,000,000 by 2018 and then adjusted ROIC growing on average just under 100 basis points each year. So you can see with the current composition of the company, we're able to drive really strong financial performance. And then by increasing the leverage and putting more focus on M and A in terms of capital deployment, we can drive substantial upside to the numbers that you see here on this page. Before I take you to that upside, let me go through one page, which I'm following in Pete's footsteps, so I have to have a bridge as well.
So this is a bridge. On the left hand side, it's the EPS range from last year's model for 2018 compared to the EPS range for 2018 for this year's model. So for clarity, kind of helping you through what's changed over the last 12 months. And the net change is $0.10 And that's really represented by the 2nd bar in the chart, which is the positive impact of our Advanced Scientific's acquisition offset by the dilutive impact of the Colpama divestiture. All the rest of the items on the page net to 0, but There are a lot of puts and takes.
Let me quickly take you through them. So obviously, foreign exchange is the big headwind. When you model forward the $0.67 headwind that we're seeing today, That equates to $0.70 difference in the model for 2018. So significant headwind, and think about FX environment today compared to this point last year, substantial change for us. But the good news is we have total line of sight to be able to offset all of that FX headwind In terms of the growth levers that we have at our disposal, in terms of the margin levers that we have and then active management of the below the line items of tax, interest in share count.
So I think that demonstrates as Pete mentioned, it demonstrates how well that we manage the company through tough environments, including this FX headwind. So my final slide here is about the upside in terms of capital deployment. I prepared a bolt on M and A case that had the same underlying operational assumptions as the no M and A case. The big difference between the two is that the leverage ratio at the end of the year in each of the 3 years of the period 2016 to 2018 It's assumed to be 2.75x. And that plus then targeting twothree of the actual deployment towards M and A Enables us to deploy $15,000,000,000 of capital versus the $8,000,000,000 in the no M and A case.
And in total, about $10,000,000,000 towards acquisitions. So what does that get us in terms of scale? By 2018, an additional $3,000,000,000 of revenue. The company will be approximately $22,000,000,000 in scale at that point. And then adjusted operating adjusted EPS, it's an additional $0.75 in 2018, which represents 3% additional growth over and above the 8% to 12% that I showed you in the no M and A case.
So we operate in a very fragmented industry. We We see a lot of potential to continue to do acquisitions. And by leveraging our balance sheet and cash flows, we think we can drive this really strong upside to the no M and A case We presented that I presented earlier. So I think you can see from the current composition of the company plus continuing the track record of capital deployment, we can create significant shareholder value and it's a really bright financial future for the company. You heard from Mark in his presentation about the strategy of the company and the proven operating formula that we have.
Pete talked about the successful year we had in 2014 and the successful year we're going to have in 2015. And hopefully, I've laid out the bright financial future. We're now going to transition to a series of presentations by some of our key operating leaders. And what they're going to do in the context of their business, they're going to tell you How they're actually going to put that proven formula and that strategy to work to make these financials real. And the first presentation in that series is by Tom Lowell, who leads Analytical Instruments business.
It's my pleasure to hand over the podium now to Tom. Thank you.
Thank you, Stephen, and good morning, everyone.
So So I'm going to take
the next 10 minutes or so leading up to the break to talk about the analytical instruments business that I lead. And I'm going to break my presentation up into 2 sections. And the first, I'll provide a brief update on the business, on our product lines, on our revenue composition and our financial profile. And my colleagues who are going to present after the break will use a similar format to introduce their businesses. In the second half of the presentation, I'm going to talk about how we run the company, how we apply the proven formula that you heard from Mark and apply it to our businesses.
And I'll use the analytical instruments business to provide those examples. So first, we start with innovation as an absolutely essential element of our success 2nd growth in the analytical instruments business. And we think about innovation a couple of different ways. First, it's providing high impact innovation to extend our customers' research capability and to provide throughput and productivity for our applied customers. Secondly, we take these very powerful analytical technologies and apply them into online and into field applications where our customers are looking for immediate measurement, detection and reaction.
And we combine all of that with our total coupling capabilities of scale, depth and value proposition. So the Analytical Instruments segment is made up of leading product lines, all focused on helping our customers solve complex challenges. I won't read all the product lines 2 here because I think you're very familiar with them. But let me just talk about the breadth that we cover from a high end mass spectrometer helping our life science customers to a handheld Raman device used in the field in Africa to detect counterfeit pharmaceuticals to an online particulate monitor in Beijing measuring pollution levels. So really an extraordinary range of technologies and customer solutions that we cover in this business.
And the key element to all of these product lines is our innovation leadership, our breadth of product portfolio So briefly on our financial profile at 3,250,000,000 In sales, we are the leader in the analytical instrument space. We grew organically 4% last year and achieved adjusted operating margins of just shy of 18%. And we spend over $200,000,000 a year customers. A few comments on our revenue composition. We have leading positions In all three businesses that you see on the left side of the chart, we have a huge installed base of instrumentation that is pulling through a very quickly growing service revenue stream.
We use our Unity Labs Services business to provide high levels of service for our instrumentation and provide enterprise service capabilities for especially our large pharmaceutical customers. And then lastly, you can see our very strong presence in emerging markets, which Based on the fact that we have local production, local sales, local service and in many cases, local R and D in those regions. So the analytical instruments business is one that you're most likely quite familiar with. It's got perhaps the longest history in our company. And so I'm going to take the rest of my presentation and stay at the company level and talk about how we apply our operating discipline to produce profitable organic growth for my business.
And that operating formula rests on the following: 1st, clearly, innovation leadership 2nd, secondly, our PPI business system third, our unparalleled commercial reach and lastly, our talent management. So our company wide R and D strategy rests on the pillars you see on the left side of the page. We start with the largest R and D spend where we have common engineering pools that all of our businesses can use. And I'll give an example of that in a minute. We have deep relationships with key opinion leaders and a very influential and active scientific advisory board.
And lastly, we have a unique depth of technical capabilities that all of our businesses leverage. As one example, over the last 2 years, we've funded about 20 programs at a corporate level focused on breakthrough innovations and combining technical capabilities across our businesses, something that Each individual business would have trouble doing, but we do through these corporately funded R and D efforts. So these are the basics of our R and D strategy as a company. We, in analytical instruments, take advantage of all the aspects that I just mentioned. As one brief example, we have a leading position in UV spectroscopy based on our site in Madison.
But we've decided to leverage our Shanghai Center of Excellence for R and D to develop UV spectroscopy products going after perhaps one of our fastest growing application 2 areas, and that's water quality in China. So taking the capabilities of one team, leveraging it through our total company capabilities in China and making sure that we're customizing products for a very fast growing Chinese market. So basis for everything we do is our PPI business system focused on quality products, ever increasing customer allegiance and productivity. And as you saw in Pete's presentation, identical pie chart, We're going to generate $330,000,000 in savings this year, nearly half of which is coming from the collective efforts of our employees using our PPI business system. And I'll give you two examples of our PPI business system in action.
The first is the foreign exchange headwinds that you've heard about in a couple of the presentations. All of our businesses have challenges from foreign exchange to one extent or another. In my business, our yen exposure is a particular area of concern and headwind. So what we did late last year is take our PPI business system and focus it squarely on this challenge. We put teams together looking at getting additional price realization from our customers, additional supplier price reductions negotiations and additional cost reduction efforts above and beyond what we had already planned for 20 team.
And we applied a PPI leader to each of these teams, and we used our kaizen method to ensure structured problem solving, But fast problem solving, putting teams together across the company to go after this FX headwind squarely. The result of all of that you've heard in multiple presentations this morning. But in our Q1 earnings, we increased our guidance adjusted EPS despite the foreign exchange headwinds that we've seen, all as a all because of the efforts of our teams using the PPI Business System. 2nd example on the right side of the page, perhaps a more traditional one that you're used to hearing from us and one that literally takes advantage of all the productivity levers you saw pie chart. We recently announced in my business that we're moving production of our GC mass spec business from the U.
S. To Singapore. And we get the following benefits from doing that. 1st, we reduce our site footprint by 1, moving from a high cost, low scale facility To low cost region production, where we get labor arbitrage, as Pete mentioned, and we also get the benefit from a very high overhead absorption Going into a center of excellence that Life Technologies had previously built in Singapore. 3rd, we get access government to move production there.
So this is a great example where we've checked off the box on every single area of productivity opportunity. We've strengthened a very important business that's growing quite quickly and improved our margins. So there's probably no more obvious source of leverage for all of our businesses than our extraordinary commercial reach. And I'll use my chromatography business as the example here. And in chromatography, we start with a strong hand.
We have leading positions in ion, 2,000,000 gas and liquid chromatography. We have a strong consumables business. We have a great software franchise with Chromelion. And we wrap all that together with our applications expertise. But then we amplify the opportunity to grow in chromatography with our total company commercial capabilities that you see on the left, Starting with our extraordinary relationships with Big Pharma and from our key account program as well as from our channel relationships.
Secondly, we have tremendous website and digital marketing capabilities to make sure we're pulling through consumables off of our chromatography installed base. We use our regional demo centers, both to showcase our new products, like our Vanquish PLC, but also to develop methods for our customers in the region. As Mark mentioned, we're opening a new center in Dubai, which is a great opportunity for my business to leverage additional company capability in the region. And then lastly, we use Unity Lab Services as a tremendous partner for us to achieve very high levels of customer response All of this adds up to a very compelling growth opportunity for chromatography. And you can see that we had excellent results in 2014.
So lastly, and perhaps most fundamental to everything we do, is our talent, our ability to hire, retain and develop the industry's best talent pool. And we do this a few different ways. First of all, we have a mission that's compelling to our employees and to prospective employees. And we have a track record of success, Which means we've got great access to the talent that wants to come into this industry. And then secondly, we have scale.
We have the ability to invest in training programs, whether it's a first time supervisor or manager, all the way up to our most senior leaders. Tremendous capability for us to grow the careers of our team. In my business, we benefit greatly from all of these capabilities. And I know that a lot of you get to interact with my leadership team at Pittcon and at ASMS and other venues. And I hope you'd agree that we put together a very strong team that we can use to scale the business and grow So to conclude my part of the presentation, I hope you got a sense of how we use our operating discipline and formula to progress all of our businesses, but with the examples in my business.
So innovation leadership, PPI business system, our unparalleled commercial reach and our talent management, which all combine to mean that our future truly has never been brighter. So with that, I'm going to hand it over to Ken, who's going to announce the break.
Thank you, Tom. So we're going to take a quick break. We're going to start back up at 10:20, and we're going to hear from Mark Stephenson, President of Life Science Solutions. Thank you. Okay.
We're going to get started with the second half of the morning. It's my pleasure to introduce President of our Life Science Solutions Business, Mark Stephenson.
Well, good morning to you all. Pleasure to be back with you this morning. And I'd like to give you a little more details this morning on why Mark and the leadership team feel more confident about the Life Sciences business, share with you some of that background and why we believe this can be an exciting growth platform for the company. I'm also going to invite my colleague, Alan Sachs, up, who is my Chief Scientific Officer and leads the R and D, and give you a couple of examples of some of the high impact innovation as Tom correctly characterized our model before that We'll give you some examples of what we're doing in the company. So just to ground you a little bit in the business.
We really do have the market leading life sciences reagents franchise. It has incredibly strong loyalty with our lab based customers and our researchers. They do incredibly complex experiments, and they rely on the quality and the innovation We've done a great job positioning our bioproduction franchise, and I'll talk more about that. And we're incredibly well positioned for what is a great market as we see biotherapeutic companies increasingly focused on protein based drugs and vaccines. And so I'll talk about that second business area of bioproduction.
I'll explain our strategy in genetic sciences, get a lot questions about this. So we'll be very clear where we're focused on the genetic sciences and how our next generation sequencing franchise fits into that. And finally, talk a little bit more and introduce some of the topics that you'll hear more from Alan and Greg later as we think about some of the capabilities to reach our customers, expanding those, sharing those across the company and why that helps leverage our platform to growth. In terms of the profile of businesses, like Tom, I won't go through all the details, but we really got to imagine in front of a customer, we can really bring together this portfolio of businesses to the customer, whether it's a pharmaceutical customer that's doing experiments that wants to model more relevant cell types. They want to analyze the gene expression and then grow that up in a protein model system, whether it's an academic researcher.
We really cut across with our technology platforms, our science platforms and then our reach to these customers very scientific conversations with these customers to offer them solutions across everything from life science research, their discovery interdiagnostics to our clinical customers. In terms of our financial profile of last year, you saw this The year ended and we strengthened, grew faster than we had historically grown to end the year growing 4%. We continue to invest strongly in R and D, about $300,000,000 7.4 percent. I'll talk about some of the changes we've done in that R and D spend and profile. And we delivered very strong operating margin as we executed on our synergy plans we've put in place and had a very successful year and continue to see that this business Can grow above the 3%, and I'll give you more details on our strategy and why I believe that's the case.
In terms of the attractive profile of this business, we're divided into 3 business areas, and a large proportion, nearly 90% of our business or recurring services that we do with our customers. We sell instrumentation really with a mind to automate those consumables And pull through more reagents. And as you can see from the geographic split, we're very well diversified with an increasing presence in the Asia Pacific region, which is a fast growing region for us as we expand our Life Sciences Solutions business. So in terms of a year later from updating you here last year, really, integration has gone incredibly well. Very good time of planning we had before closure, very open mind to share best practices and to really come into this year and deliver on all the things we've set out to do as we brought Life Technologies into Thermo Fisher Scientific.
Some of the key things we've done to update you 1 year on. As Tom outlined, the business model, really, we've adopted many of those key processes into the business, PPI business system, our customer focused metrics, measuring those and ensuring as we made changes in some of the back office integration we didn't disturb our customers and getting really focused on ensuring that our R and D spend was very focused on high impact innovation. As Pete and Mark outlined, we delivered and actually have accelerated the delivery of the cost synergies. And during our 1st year, I spent a lot of time outlining where we'd find the right revenue synergies, which I'll outline on the next slide. And really, as we've operated the business, we really align the management team around accelerating organic growth And so ensuring that our cost structure and the business leaders have full alignment around those P and Ls to drive organic growth And really making sure we're targeting some of the high growth markets, such as the bioproduction market and making sure that as we maintain a high investment in R and D, but we really focus on where we can get a great economic impact, where we can make a difference with our customers, both to prioritize that spend and then also ensure that we get really effective commercialization and uptake of our new products.
So the integration, 1 year on, very much on track with everything we announced and well positioned to achieve not only the cost synergies that have been laid out for 3 years, but also to start to deliver on the revenue synergies in this year, too. Now in terms of our intense focus on accelerating our growth and consistently achieving above this 3% level of growth, The first is we're really benefiting from this total company value proposition. You heard a little bit from Tom. You'll hear further from my colleagues presenting, Alan and Greg. But this access to company wide corporate accounts, particularly the biopharma and pharmaceutical accounts, allows us more in different conversations, conversations with the business office and the pharmaceutical companies, conversations about projects and problems that they bring to us because we're engaged in the business partner with them.
Really a different level of conversation than we would have had previously just at the lab science bench level. So expanding out some of the scientific conversations to a wider conversation. Secondly, we've been expanding out not only our direct sales channel. But since the beginning of this year, we've also added many of our products through the Fisher Scientific Channels, giving more access, more conversations, where Fisher is very much a partner with the lab and the companies. Also in the emerging markets, The emerging market's presence and scale allows us again to have more conversations and synergy against some of these high growth areas.
And together with Andy Thompson and his business, you'll hear some examples where the knowledge, the regulatory presence, the experience in the clinical markets it allows us to think about and start to execute on some opportunities for our genetic sciences, particularly into some of these clinical markets that we see beginning to adopt next generation sequencing technologies. And finally, we're using our e business platform that we're very much focused on building up to get more traffic to that, building up greater presence. And as we do that, building up a greater scale, both here in the U. S. And also globally to serve our customers.
So these are some of the examples that are driving our company value proposition. We've also, as I mentioned, targeted our innovation and ensure that our business and commercial teams are really positioning ourselves into the high growth markets, all of which we believe will align ourselves to high growth than we've Within the Life Science Solutions businesses, as I mentioned, our Biosciences portfolio, very strong brands and portfolio with our customers. Really, 2 fundamental changes we're making to accelerate the growth in that area. First is I really focused on this commercial reach. So the change that we've had in channel scale, in our corporate accounts, in emerging markets and e commerce allows us to have more conversations.
This is still a relatively fragmented market to grow our share in those markets. The second deliberate change we've made is to Allow this business to invest in R and D to reinvigorate some of our core franchises. So we have core franchises, for example, in cell biology, where we have customers wanting to transfect and insert DNA into hard to transfect cells like stem cells And developing new reagents that are 10x more efficient, not only develop that category, but also get us renewed conversations about our cellular biology, our GIBCO franchise. Another example in molecular biology, 100 of 1,000,000 of dollars worth of business in a core franchise. We reinvigorate that franchise using our core center of excellence that we have in Vilnius in Lithuania, making faster enzymes for that, but again reinvigorate that franchise.
And finally, an example in cell analysis where we built out increasingly customers want to functionalize and see the functional work that's going on in the genome and analyze the drug discovery. And so developing devices and consumables Again, allow us to build out our franchise, build out systems, an example here shown in the Q bit. So really expanding our presence Investing in some of our core franchise will be a third part of our change here. In terms of the bioproduction space, we really had a perfect marriage here of 2 technologies in the integration, which was a leading presence in single use technologies, which are increasingly being adopted as in the biotherapeutic manufacturing area with our leading presence in cell culture and to bring those 2 together at scale to create a unique customer value for them. We've been expanding our capabilities, particularly in the fast growing regions, China, Korea, India, and building up that scale to support our customers technically.
And finally, investing in capacity. We've done a good job executing in this market, but also the business and market is growing fast. So Making sure we're able to supply up. We're just opening a new plant this month in Scotland, in Inchonin to produce some of our granulated media, getting our key customers through that and meeting their customer requirements. In addition, as you've heard, we added to our capability in single use, a their presence and capture synergy together by offering a second source supplier to key customers in this area.
So we're well positioned to continue our leadership in this very high growth market. And third, in our genetic sciences, We really have a strong presence already, a $1,700,000,000 franchise in our genetic sciences. We're really taking a very careful and deliberate approach to the areas and focus that we put through R and D to ensure that we continue to get a good return and high Titan Innovation. So a couple of examples that we're doing. Firstly, we're refreshing some of our core genetic analysis platforms.
As you had mentioned, we just introduced a new QPCR system. This replaces something we'd introduced 5 years ago. And so it's a major refresh in the product line that it was released, the American Cancer Research Area. And we're also focused on some key applications that are a perfect fit for high throughput screening when you have a set number of genetic targets like pharmacogenomics, where it's a well known set of markers that you're screening for. We continue to see our customers use our capillary electrophoresis platforms of the gold standard to confirm our sequencing mutations in a clinical setting and also for forensic applications in well set up databases and in a decentralized setting.
And finally, in the fast growing next generation sequencing market, Our chosen strategy is to focus on clinical applications and where we see an advantage in having a low input clinical material box, and we've developed companion diagnostics for oncology that we've announced with key pharmaceutical partners And then also now built out during this last year CEIVD, FDA cleared platforms that are really targeting these clinical applications that are a good fit actually talk a little bit more and give you some examples of some of the high impact innovation. Alan, who leads to R and D, will now take you through some of those examples. Alan?
Well, thanks, Mark. The innovation challenge within R and D is to really enhance the market leadership for these core products that Mark referred to, but also create new growth opportunities. So what I'm going to talk about today are really each of those. And as an example, in terms of our TOR portfolio on how to enhance it. I'll discuss the QuantStudio 3 and 5 qPCR device, which is shown on the top right.
Real time PCR, qPCR. It was something that Life Technologies was a leader in and Thermo Fisher now is a leader in. And refreshing this is incredibly important to our franchise. So we are we just launched early in May a new device, QuantStudio 3 and later, QuantStudio 5, When our younger customers approach an instrument, they expect the touchscreen to behave like a cell phone. They expect to swipe, expand and touch and rapidly get response.
And so this new qPCR device accomplishes each of those goals. And likewise, our customers are expecting now for data to be stored in the cloud and for them to be able to analyze information using cloud based software. This new device is cloud enabled. And importantly for the customers, they can set up the experiment, monitor the progress of the experiment and get all the data from the experiment by sitting at their desk connected to an Internet. They no longer have to be at the device doing the work.
And we think this is a differentiating feature for this very important part of the franchise. We also need to create new growth opportunities, and next generation sequencing Certainly, it's a huge opportunity for us. We see the clinical sequencing space as the major area that fits nicely with our technology. We see actionable information as the most important deliverable. And just as in the water quality example that Tom discussed, we want to provide scientists and physicians with information they can do something with.
And so our next generation sequencing system accomplishes that for many reasons, each of which we continue to improve upon. To begin with, if you have cancer, you really want only information that you can make therapeutic decisions around. The genes involved in driving cancer, we've identified through our Oncomine database through the acquisition of Compendia. And those genes are then amplified from a tumor sample using our AmpliSeq protocol. The amount of material needed is very small.
It fits in a needle. So if you have cancer and you have a needle biopsy, We can pretty much guarantee you can get the information that you're looking for. And then the clinical labs will take the material from Ion AmpliSeq and put it on Ion Sheff system, which is a hands free system that allows for the preparation of what becomes the Ion sequencing chip, which is put into one of our sequencers, in this example, the Ion PGM sequencer. This information, of course, is then analyzed as well in the cloud using our IR reporter system. And it's done very rapidly and very inexpensively.
So whereas there are many other applications for next generation sequencing. We believe that our panel based approach in the clinical setting will soon enough be providing significant advantages. As an aside, Tom also discussed the mass spectrometry group and all the work that we have going on with mass terometry analysis of biological samples. There, too, we're very busy and will soon be releasing cloud enabled software for analyzing mass spectrometry data. So our customers in one location will be looking at both next generation sequencing, quantitative PCR, digital PCR, capital electrophoresis and mass spectrometry data with all the software solutions they need.
The cloud enabled system has other advantages to our customers that go beyond a device. In this example, we have placed thousands of quantitative PCR instruments around the globe that are used routinely to study outbreaks, both for epidemiologic reasons as well as for security reasons. In the current world, those data can be put in a folder that may be shared with others around the globe or in the worst case have to be shipped as hard copies. But because we now are providing an environment in the Thermo Fisher cloud, those data can be easily accessed by any of the investigators around the globe in real time to see where these outbreaks are occurring, including investigators at the Centers For Disease Control in this country, and then make rapid decisions about what to do. And so it isn't only about setting up an instrument or monitoring the progress.
It's about the availability of the information in real time for people who may not even be on the same continent, but who are very interested in analyzing the data. So we're very excited about providing this opportunity to all of our customers within Thermo Fisher Scientific, and this is an example of that. As I said earlier, the ability to And we all know that prayers that occur when a physician makes a treatment decision for a patient. Today, drug companies are force to identify patients who have specific DNA mutations in order to prescribe their drugs. The National Cancer Institute has developed a large umbrella program, including many different pharmaceutical companies and their compounds that will allow for over 3,000 cancer patients to be sequenced, have their DNA sequenced, and then a drug from one of those companies to be prescribed.
The goal here is to prove that it actually makes a difference to have molecular DNA sequencing done on a tumor sample to improve patient outcome. The National Cancer Institute chose our platform for several reasons. A primary one was it's very low input because the worst thing to happen for a patient is to provide a sample that can't be analyzed, but also the expense and the speed with which we can both gather and analyze the data with differentiation feature. So a lot of the R and D that we do in innovation, together with this innovative study design led by the National Cancer Institute, truly will impact patient health Mount Sinai School of Medicine here in New York City. It's called the Resilience Project.
There are about 700 genes in the human genome that when mutated lead to disease. But there are people who are walking around perfectly healthy that contain one of these mutations. This resilience project is aimed at identifying who those people are and then understanding what else about their genome or about their environment has prevented them from falling looking at the 700 or so genes that can lead to disease. And so the Mount Sinai School of Medicine decided to work over the hundreds of thousands of samples needed, again using the Ion AmpliSeq, the Ion Chef and the Ion Proton DNA sequencers. Information that allows us in the medical community to understand why people don't get sick This is as important as an understanding why people do get sick, and we're very excited about working with the institute at Mount Sinai to achieve those goals.
So I'll close by saying that within Thermo Fisher Scientific, our scientists come to work every day to really improve patient health, And we're passionate about continuing in the future. So with that, I'll turn it back to Mark to close on the Life Science Group
discussion. Thanks, Glenn. Thank you, Alan. Just a couple of examples. So let me close by just saying, the integration has gone incredibly well.
I think We are very well positioned to accelerate and exceed our historical growth. We have a great business here. It's a great franchise in some good markets. But we've also adopted and I think we're running the business better by taking some of the business models across the profession of the company. With that, I'll thank you and invite my colleague, Andy Thompson, up who leads our Specialty Diagnostics Group to talk about some of the opportunities we have there.
So good morning. It's a pleasure to be back in front of you all again this year. We've got some really exciting updates to share And similar to past years, we will focus on the growth drivers. But I think what you'll notice different in this presentation is we've taken a deeper look at how we're leveraging the core capabilities across the company to really bring some truly innovative solutions to bear 2nd question in diagnostics. So I'm excited to take you through those.
So firstly and And most importantly, our strategy in diagnostics is very clear and it hasn't changed. We focus exclusively on niche end markets. And when we execute well here, we create high barriers to entry, protected either through intellectual property, scientific know how or scale in both our manufacturing and our commercial investments. The results are attractive growth businesses with resulting industry leading margins. We remain very excited and optimistic about the emerging opportunities in emerging markets.
Increasingly, these growing middle classes are demanding greater access to healthcare and governments are complying by making this a significant portion of their spend. The last point on the slide is an important one. Because of our focus and our leadership in these niche segments, We gain truly early access and insight to emerging issues that our customers are facing. And when we apply our unmatched tools and scientific expertise to this. We really can bring innovative solutions to bear.
So to our profile. Our diagnostics businesses are split into the 6 businesses that you know. And what I thought I would use this slide for is to share with you just how we, a couple of examples of how the aforementioned high barriers to entry are maintained. Firstly, on the left hand side to our Clinical Diagnostics division. And it's here where in our biomarker business, The team created the industry leading gold standard test for sepsis diagnosis, PCT.
This is an intellectually protected assay that is available throughout the world, either on our partners' platforms or through our own direct commercial teams. This assay is incredibly has demonstrated incredible clinical utility, saved 1,000 of lives. And we really are just at the cusp of entering some incredibly important markets, principally in the U. S. So moving next to the immunodiagnostics business.
Here, we have a leadership position in allergy. And this business is protected through our in house antibody expertise and our scale commercial and manufacturing investments. Skipping to transplant diagnostics, this is an incredibly focused and dedicated market. So the key opinion leaders in this market work very closely with our key scientists. And through that, we develop the next gen market leading solutions for that business.
And lastly and of note is our healthcare market channel. And here, we serve 100 percent of the U. S. Hospital and reference lab market, and this gives us unparalleled reach for our own self manufacture products, but also for our greater than 800 third party suppliers. So truly a unique advantage in how we reach the market.
So when we sum the businesses together, it makes for a very attractive picture. Our 2014 revenue topped 3,300,000,000 And it grew at a solid 5% organic growth rate. We continue to fully fund our R and D opportunities. And we do all of this with industry leading margins north of 20% 27%. So moving to our revenue profile.
The first graphic supports my earlier comments. We are focused on balance in niche markets. You see the $100,000,000 of the $1,000,000,000 healthcare market channel on the top right, all the way through to the very focused and high profitability transplant diagnostics business at 200,000,000 The middle graphic tells an interesting story as well. You see here at greater than 90% of our revenue created from consumable and reagent stream. This is an incredibly profitable annuity that's only enabled through extensive contract and OEM manufacturing agreements that we have in place with virtually all large IVD suppliers.
So unique position to be in and a scenario that we're highly focused on. And lastly, on the right side, you'll note that We've got a significant opportunity in Asia Pacific and the rest of the world markets. In vitro Diagnostics is generally a later to develop need in these markets as they solve some of the primary healthcare needs first. This is good news for us. This means that these emerging middle classes are starting to demand access to leading in vitro diagnostic solutions And we're there with those answers.
When we think about our growth strategy, it's helpful to think around 3 major pillars. Starting with the top circle, you've heard me mention before just how important our customer relationships are and it's here where we gain unique access an insight into their issues. That in turn gives us the opportunity to apply our tools and scientific expertise to deliver truly innovative solutions. And lastly, our deep commercial reach, whether to traditional, hospital and reference Labs are increasingly to niche specialty markets. We are clearly differentiated with our ability to reach our customer base.
And I'll touch on each of these segments in turn. So while a lot of customers claim deep customer relationships. We live this on a daily basis. And for many of our customers, we are their go to partner when they look to answer their challenges in diagnostics. So whether it's introducing novel and ever expanding allergy menu to primary care physicians or to helping our food safety lab customers release products
team. We are very pleased
with confidence in a timely and cost efficient fashion. These relationships make us smarter in everything we do. We gain powerful insights into whether specific issues are increasingly how to solve workflow challenges. We gain access and understanding to the regulatory and payer and provider changes in the marketplace. And this enables us to help adjust our health economic and our reimbursement strategies to make sure that we're staying at the forefront of our competition.
So when we do deliver innovative strategies, we get rapid adoption, we get key opinion leader support, And we get a very rapid and constructive feedback loop to help us iterate and continuously improve our portfolio as we progress. So when we think about innovation, we do so along a few different lines. For many of our customers. Innovation comes in the form of new menu extensions, where they can leverage the investments they've made in capital equipment and the infrastructure in their lab. And a couple of good examples here you see on the slide.
We were the first to market With hydromorphone and hydrocodone, these are 2 important menu extensions for our drugs of abuse platform. We also look outside of the lab to solve needs in workflow. And in this case, a great example is our oral fluids, Drug Zavu System. Here, we're looking at moving from urine to oral fluid or saliva collection. This greatly eases the burden of collection and greatly reduces the opportunities to adulterate the sample.
This has been a breakthrough innovation for our criminal justice and our pain management center markets. But also our customers look to us to solve workflow problems. They see our breadth and they increasingly want to ask us how that they can do their work in an easier, faster, more cost efficient manner. And a great example here is what we're doing with our food safety lab customers. Here, we combined our highly relevant and accurate menu of PCR assays.
This is our SureTech portfolio from our microbiology business. And we combine that with the high throughput 7,500 fast PCR system 2nd question from our Life Science Solutions team. The result is a market leading workflow that is helping us rapidly expand our position in an important and growing segment. We do both of these types of innovation routinely and But importantly and clearly, not all customer workflows are created equal. And there are times when our customers look to solve unmet diagnostic needs that require leading scientists working with breakthrough technology.
And this was the case with the bone marrow transplant business. This is a relatively narrow field within transplant diagnostics, but nonetheless an important and up till now underserved segment of that market. The traditional workflow did not provide high enough resolution nor specificity to ensure or give the confidence to the providers that they were getting a high quality match between donor and patient. Our solution here was enabled by our leading transplant diagnostic scientists working with breakthrough true technology of the PGM next gen sequencer. The result was full gene coverage, Providing the required resolution and specificity to ensure a high quality match, all this done with a dramatically improved workflow.
The solution introduced in November of last year is now the standard for the industry. So, while the bone marrow workflow is exciting, it really is just one of many development opportunities that we have to really leverage the full core capability of the company. Increasingly, solutions to complex diagnostic problems will prior, not 1, not 2, but often 3 and 4 capabilities in order to solve. And there are no other companies better position to deliver that on that promise. To illustrate how broadly we're leaning on these capabilities, I've got three examples here Starting on the left, in serving primary care physicians, 50% of the People in this room or maybe about 80% of those people in this room know that the diagnosis of prostate cancer And discussions with primary care physician is a very difficult topic.
The current standard of care and diagnostics is a prostate specific antigen test. It's not an accurate test. Many doctors have abandoned it altogether, and it's clearly an unmet diagnostics need. So working with the Karolinska Institute in Sweden and applying our proteomic, genomic and assay development technologies, We've come up with a novel solution for diagnosis of prostate cancer. So this is early days and more work had come here, But it's clearly very exciting.
It would not have happened without the ability to leverage these capabilities across the company. Moving to the middle. In the fast paced hospital environment, they've always asked for the specificity and sensitivity of mass spectrometry. And we're bringing that solution to them with our Cascadian product offering. You've heard me talk about it before.
This is an advanced stage development project, where the goal is to have a sample in, result out platform that looks and feels like any analyzer that would be that would not be out of place in a busy, fast paced central lab. Again, only enabled by our proteomic capabilities together with our leading assay development on automation expertise. And lastly, to the oncologists, you heard Mark Casper in his opening remarks, you heard Mark Stephenson talk about Oncomine assay. This incredibly valuable tool for oncologists where with just one test, one sample, you get results for the 50 or 52 most relevant genes associated With cancers that have either in development or on market targeted therapies available. So an incredibly powerful tool 2 oncologists.
All of these projects not possible without leveraging the core company capability. So all of the breakthrough innovation in the world is not of much use if you can't get it to customers. And here, our broad scale and reach makes a meaningful difference. There are 4 examples listed here. I'll touch on 2 That I think are particularly highlight the advantages of our scale and reach.
Samsung, in their effort to get into the diagnostics market, dedicated their efforts to point of care diagnostics in three areas, in clinical chemistry, in immunoassay and in hematology. And they created a very compelling portfolio across all three of those lines by combining their expertise in nanotechnology with elegant consumer electronics. They really did have a compelling portfolio. What they lacked was the ability to reach their customers.
What they lacked was an understanding
of the regulatory and in vitro diagnostic landscape. And what they lacked was in vitro diagnostic landscape. And what they lacked was content to apply onto these innovative platforms. So for all of those reasons and more, they turn to Thermo Fisher Scientific to deliver that promise. So in December of last year, we launched our worldwide global distribution agreement with Samsung, and we're off to a flying start.
And then the last example from this page is in Japan. And in 2013, we're hearing from our customers That they wanted a screening allergy test. So working with a key reference lab in Japan from concept To product launch, in 12 months, we developed our Viu allergy product. And 12 months later, We enjoy a leading market position with this with meaningful revenues in a very fast growing and attractive segment in Japan. So both of those opportunities don't come about without the commercial reach and the deep customer relationships So I'll leave you where I started.
And I hope in the brief time I shared with you, I've been able to convey my enthusiasm for these businesses and I hope I've convinced you of the very bright future that
we have ahead of us.
With that, it's my pleasure
Mark and you've heard from the rest of my colleagues about how we're using our leadership and innovation, our global footprint, our talent base as well as our PPI business systems to drive growth for our company. Now for our discussion, obviously, I'll be Discussing our laboratory products and services business. And here, this is really a story about scale. It's about depth of capabilities. And it's how this creates a tremendous platform for growth for the entire company.
Now, we'll discuss how when you combine this platform With our unique customer value proposition, we've created a tremendous engine for growth for the entire company. In addition, what I'm going to do is I'll share with you a customer video that brings that to life to give a little more clarity to it. And then we'll discuss how we're continuing to build upon that value proposition and make it even stronger for the future. In addition, Greg Herrima will be discussing how we're expanding our presence in the E Business, As well as leveraging our channel to grow our Life Science Solutions business. So I can tell you through all of these capabilities, I feel tremendously confident around our future as it relates to growth.
I mean, we're clearly positioned better than anyone else in our industry to win with our customers. So let me share a little bit why I feel so strongly about that. First, let's just cover a couple of things about the Laboratory Products and Services segment. As Mark said, this is our largest segment. It's $6,500,000,000 It consists of 3 distinct businesses.
And in each of those businesses, we have the 1 the number one market share position. 2nd, our businesses are deeply entrenched with our customers on a day to day basis. And we enjoy really an unmatched customer reach access that enables us to drive growth into a diverse set of end markets. 3rd, the segment provides a foundation for leveraging our unique value proposition and really acts as a platform to accelerate growth across the entire company. Platform to accelerate growth across the entire company.
And then finally, we've consistently outpaced market growth and grown at 2 times the market growth rate over time. So let me tell you a little bit more how we will Sustain this growth going forward. First, just a quick overview of our businesses and where they stand. So as I said, we have 3 distinct yet complementary businesses that all have industry leading depth of capabilities. So starting with our laboratory products business, we're the largest manufacturer of lab consumables and equipment.
Next, our research and safety market channel. Here we have an industry leading portfolio, 2 world class supply chain, a leading e commerce platform and the combination of all this really makes us an ultimate partner to support customers with essential needs for equipment, consumables and services. And then finally in our biopharma services business. Here we're a best in class clinical trials logistics partner. We're helping customers to accelerate their new product approval process and providing a broad set of outsourcing solutions for them.
And essentially what this means is that for patients participating in clinical trials, we're ensuring that their medications get to them when and where We've been able to translate all of this into solid growth opportunities and strong performance, which we're proud of. If you look at 2014 for this segment, we had strong organic growth at 5%. We're continuing to invest to build on our lab products portfolio. And then we're also translating all this into strong operating margin improvement What I want to point out here really is about scale, its depth to capabilities, and it's across instruments, it's across consumables as well as services. It's about having a global reach and really driving that through our principal brands.
So this gives you a sense of scale and the unique opportunity that we have with our customers. So at this point, what I really want to do is transition the dialogue of how we leverage this segment access that we have to our customers that allow us to deliver a value proposition that's unique in our industry. So first, let's take a look across Thermo Fisher. And we truly have an extensive reach to our customers. And this is a key differentiator for us.
So let me just refer to a few different stats that support that. In terms of unmatched commercial capabilities, it really starts with the over 17,000 employees that we have that are interacting with customers on a daily basis. In addition to that, we're really the industry leader as it relates to being the innovation and technology partner to our customers. We have over 5,000 scientists, engineers who are collaborating and working with key technology partners in our customer base. In addition, we have extensive reach through our e business platforms to many levels within our customer base, and this is something that Greg will be And finally, we have over 4,000 on-site supply centers That our customers are using for easy access to inventory and improve their supply chain operations.
Now in addition to our extensive customer reach, through our leadership as an industry leader, We have tremendous access to decision makers in our customer base. Whether it's Mark, whether it's myself or any of our executive team, We're interacting directly with the CEOs, all of the key executives with all of our key customers. In addition, our teams have access to the appropriate leaders, whether it's in procurement, R and D, manufacturing and all the other key touch 2 points within our customer base. So when you take this and put it all together, we have a tremendous extensive reach to our customers. And what this enables us to do is be really the ultimate partner to our customers and better understand and drive and suit their needs to drive their businesses forward.
Now as far as our value proposition and working with customers. Our customers like us are really focused on growing their businesses faster and improving their profitability. So due to that, there is a need they have a need to accelerate innovation in their businesses to drive down costs and really be more productive. As Mark shared with you before, we're expanding the impact of our value proposition over the years and we're doing this with existing customers. We're also doing it with new customers.
And why do they really want to work with us? And it's It's really quite simple, and it's at the heart of how we define our value proposition. And that's to help our customers, both from an innovation and productivity perspective. So as you can see here on the upper right hand part of the chart, we've had excellent progress with our biopharma customers over the years. Just recently To bring this to life a bit, I was having an executive review with 1 of our largest pharma customers.
And through the partnership, it's clear what we've created together. 1, they're using our mass spectrometry technology to accelerate discoveries in their proteomic research. They're leveraging our channel business To deliver key products to their labs and optimize their supply chain. We're managing many of their clinical trials, which ensuring that their products are appropriately and timely going through the approval process. And in addition, They're using our single use technologies to drive manufacturing efficiencies and manufacturing yields on the production floor.
So you can see the value proposition we have is really resonating extremely well with large pharma customers. And we've been able to do this at an impressive rate over an extended period of time. Based on this experience Over the last couple of years now, we've been managing and tailoring this value proposition so that we can expand it to meet the needs of other customer sets in the marketplace. And that includes the small and medium sized biotech customers. So let me share a little bit more about these customers and some of the activities that we have going.
First,
the needs
of these customers are somewhat unique. These are companies that are all challenged to rapidly scale and grow their businesses As they develop success in their capabilities. What they're doing is they're leaning on the tremendous capabilities and experience that we have to help them meet the needs of expanding and growing their business. What are we specifically providing them? One, what we bring to the table is applications expertise and extensive depth of portfolio.
This is critical as they look to equip 2nd and ramp up their lab capabilities. In addition, we're engaged with them deeply from a scientific collaboration perspective, And this is getting at addressing the analytical challenges that they face as they're trying to accelerate their way through their discovery process. When it comes to bringing products to market, we provide turnkey clinical trial programs, And this is enabling them to meet aggressive timelines for product approval. Finally, we're providing proven solutions as they move into the manufacturing realm and flexible manufacturing capabilities that they can use as they So in addition to hearing it from myself, what I wanted to do was share a specific customer video that brings this more to life. And on this one, this is about genomic health.
Information. In addition, it's an example with genomic health is how they're expanding their business
And how
those needs align very well with our capabilities and the unique value proposition that we bring to them. Now, there's a bit of a background in terms of what genomic health is facing and helping to address in the marketplace. Last year, there was roughly about $80,000,000,000 that was spent on cancer drugs. And of that, there was only about a 25% efficacy rate associated with those products. So obviously a tremendous amount of waste in terms of spending on treatments in the marketplace.
Now Genomic Health has developed and has marketed a product called Oncotype DX test. And this is the only test So why don't we get into the video here. And this is from Genomic Health. This is Senior Vice President, John Casale, and he'll share some more details on what they're doing and how we're working with them.
For us, scalability is a sort of central issue that we think about Every day, all the time. And we think about in connection with Thermo Fisher, I'll have a big project going with them, one of our largest ever automation projects. So Genomic Health is the world's leading provider of genomics based assays for addressing the overtreatment of early stage cancer. That's what our test is designed to do and provide them with information that they Can't get from any other test or procedure on the aggressiveness of their tumor and therefore what
On the other hand, there
are women who have very high risk aggressive tumors. Differentiating between those two patients Was very difficult, if not impossible, to do well prior to Oncotype DX. So the laboratories that we're Conducting the test in are set up as they're sort of industrial molecular biology labs. We have many different pieces equipment, all kinds of different things. So when I think of Thermo Fisher Scientific, the very first thing that comes to mind is breadth Of the product offering, I think it's very unusual.
It's a real strategic advantage that I think Thermo Fisher Scientific has. I think there's also considerable depth in a number of areas. We make very heavy use of HPLC In our quality control testing, we're intending to do some engineering on our biorepository. So part of that more holistic discussion with Thermo that we've entered into recently includes looking at service. There are obviously not many companies that have That sort of span, providing HPLC equipment and histology, consumables and Automation, robotics, we've had a really productive dialogue lately about thinking holistically.
So we'll be interested in a lot of further discussion about that.
Sure. So just a little bit more on some of what genomic health is doing. Just over the last few years, they've brought to the marketplace over 500,000 of these Oncotype DX tests, And which has obviously contributed to saving a lot in terms of treatments in the marketplace. Now they're positioned to deliver another $1,000,000 over the next 2 years and they're also working on additional set of development tests that obviously that we're closely engaged with them in developing those. It's really an exciting position that we're in with the value proposition that we have.
And we can work with companies Like genomic health, they're really doing some very important things as far as advancing treatments in the marketplace. It's the unique value proposition that we have that we can develop the and address the special needs of customers like this. And what I can say is that there's really no other supplier in the industry that can bring anything like this to help customers accelerate in the biotech space and meet some important needs for their customers. Now what I'd like to do is transition the discussion and I'm going to introduce Greg Harrimag. Greg runs our customer channels business.
And what he's going to be discussing and sharing with you is how we're expanding our market presence through our industry leading e commerce platforms And also how we're accelerating our Life Science Solutions business by leveraging our channel business. So Greg?
Thank you, Alan, for the introduction. And as Alan indicated, I'm going to wrap up our session this morning with a capabilities update on the channel and how we're leveraging the channel to accelerate growth for the overall company, and in particular, our life science solutions business. But before I do that, I want to touch on one really important total company topic, and that is how we are transforming our web and e commerce capabilities to drive growth in accelerated way for the future of the overall company. So before I talk about the transformation, it's important to understand that already today, we have the industry leading platforms in the industry. We already do over $2,500,000,000 worth of e commerce revenue.
So we're starting from a position of strength And looking at continuing to build on that in the future. So let me start first with what we're doing with the website properties in our self manufacturing businesses. So we'll be combining the lifetech.com website with the thermoscientific.com website to create an all new website named thermofisher tshirt.com. And we'll be using the lifetech.com website as the core platform for that new website. The website will be the go to destination for all of our self manufactured products, software and services.
And we'll be full of rich product content, applications notes. And as Alan Sacks touched on earlier, data and application services that we host in the Thermo Fisher Cloud Suite, All of which will be backed by the industry leading e commerce platform. We'll be rolling out the platform later this year. And it's a platform that we are confident website we're confident is truly going to be a home run with our customers. We're already launching an entire new fishersi.com website channel business that I'm responsible for today.
And that new website platform will truly be a global platform for the business. We already have the leading e commerce transaction platform channel in our industry today. And we'll continue to build on that strength with significant enhancements in terms of product content, search and navigation capabilities. We'll be increasing the capabilities we have for supplier and customer self-service on the website and very importantly, streamlining and further simplifying the e procurement practices that many of our customers use the website for today. So We take a step back today.
Again, we're operating from a position of strength. We have the 2 leading platforms in the industry today, and we are transforming those platforms to ensure that we maintain that leadership position in the future, that we have a platform that really platforms that allow us to showcase all of the capabilities in the company this is a terrific business. I took over responsibility for the business about a year ago. And truly, what I've seen is how powerful it is as the ultimate channel partner in delivering productivity for our customers. So our channel value proposition has been focused around choice convenience, and we continue to emphasize that.
And we achieved that through delivering the broadest portfolio of products and suppliers, an industry leading web and e commerce platform And also world class supply chain infrastructure and services that allow us to deliver superior service levels for the products that we provide to customers. Now we're wrapping around and integrating that core service capability, a number of additional differentiated services that we think are going to only increase the value proposition for our customers, enable us to deliver more laboratory productivity. More and more of our customers are outsourcing their entire non strategic spend to the channel. And we're working closely with our Unity Labs Services business to implement high value on-site services like inventory management and also hazardous chemical tracking on our customers' sites. And lastly, we're very focused on driving a true global operating platform for this business in terms of operating processes, infrastructure and the presence we have for the business around the world.
We've migrated now to a pan European business in Europe. We are introducing new global platforms like the fissureside.com website. We're leveraging the overall company capabilities and presence in infrastructure in emerging markets like China and India to accelerate growth in those areas. So as I opened on this particular slide, the channel truly is the ultimate channel partner for many of our customers and really the premier global lab TWICE partner and productivity enabler for our customers and doing so in a way that is helping us to accelerate growth. And fortunately, with the introduction of the life science solutions reagents that we're now selling through the channel, toil in the life sciences space and really have created a go to destination for our customers, specifically for the channel that is second to none.
And I wanted to share with you a little bit more detail around the capabilities we have uniquely within the channel and also the Life Solutions business, so you can see just how complementary these businesses are and in aggregate, how powerful they are for the business. So So if we start with the research market channel, we have the broadest portfolio of consumables and equipment and now reagents, backed by the leading offering of Life Sciences brand as a channel. We have strong enterprise level relationships that allow us to really take full advantage of that overall customer value proposition we have in the company unmatched customer reach with the business serving over 30,000 customers in North America alone. Now if you take a look at the Life Science Solutions business, as Mark Stephenson indicated earlier, we have the leading portfolio of reagents backed by unrivaled brands, as you can see here, also complemented with deep applications expertise and workflow knowledge. We have very strong end user relationships and a world class on-site supply center program that Alan referenced a little bit earlier as well.
Together, these two businesses really are a marriage Made in heaven. The strength of the portfolio we have now is second to none. It is highly differentiated in terms of the overall portfolio and the capabilities we wrap around that and is really resonating well with our customers already today. And I want to give you a perspective now on just what we're seeing is we've launched the sale of many of the life science solutions that reagents through the channel earlier this year in January and what the impact is that we've already seen. So first of all, we've seen a measurable step up in terms of the sales for these types of products through the channel at the beginning of the year and on an end to end basis as well.
We're leveraging that broader customer reach and access that we have within the channel to bring these products to customers that have never purchased from the Life Science Solutions business before and already can tally to over 500 customers that are buying these products through the channel that never bought directly from Life Technologies or the Life Science Solutions business in the past. We're also growing our business with our existing customers through a combination of new wins and also conversions from suppliers that are not using the channel today. And as a result of that, we're seeing growth for those core customers and a steadily increasing pipeline of new incremental reagent growth opportunities for the channel and the overall company that we're confident is going to help deliver 2nd meaningful weight to that overall $60,000,000 worth of revenue synergies that we're committed to delivering as a company here in 2015. So now I want to just wrap with a couple closing thoughts relative to the laboratory product segment that Alan opened with just a few moments ago. So as Alan indicated, we have the number one market positions in all three businesses.
And the strength of
those businesses puts us in
a position where we have unmatched customer reach and access that in turn allows us to drive incremental growth within these businesses. And these businesses serve as the foundation for the unique customer value proposition we have across the entire company and again, then help us in turn accelerate growth for the overall company. And lastly, as Alan indicated, the businesses have been growing 2x faster than the overall markets that we serve. And we're confident with the work that we're doing in the businesses that, that trend is going to continue future. So thanks for an opportunity to share with you an update on the channel and our capabilities in the channel and how we're leveraging those capabilities to accelerate growth for the overall company and very specifically for our Life Science Solutions business.
I'd now like to turn it over to Mark Casper, who will provide a brief closing summary, and then we'll open it up to the Q and A section of the analyst meeting. Thank you.
So as I had wrapped up my presentation earlier, I think you got a good sense this morning why our future has never been brighter. We serve great markets. We have tremendous opportunities as the industry leader to deliver not only on a great track record terrific future financially. With that, I'm happy to be your MC for Q and A, and the members of the leadership team will be happy to field the questions. Ken we'll work the microphones and we'll start that process.
Thanks Mark for the meeting. I think it's been great. So two questions for me. One, you talked a bit about bioproduction and kind of how attractive that market is and obviously over the last 5 years 2 assets have gone to different firms. I'm just kind of curious on your thoughts kind of your own scale in that segment and what the challenges to consolidate that market have been and then maybe some of your thoughts kind of around other submarkets that you think are particularly fragmented and maybe thoughts on asset valuations?
Thanks.
Sure. So that was John Groberg. I'll do your intro, but we'll have the others do that. So thanks for the question, John. In terms of bioproduction, as Mark laid out, we have a $0.75 billion business, very strong position.
The acquisition of Advanced Scientific strength of that acquisition strength of that capability. We play in 2 fields. We play in cell culture we play in single use of which we're the leader in both. It's a large market. There's areas of process chromatography, filtration and others where this is not a big focus.
And customers buy best of breed, of which we have the best of breed in 2 important segments. And we think it's a great growth market team that will be very well positioned into the future. And some of the things that happened last week in our industry don't change whatsoever our competitive position from that standpoint. So we got a great business there with a good future. In terms of priorities, M and A and some of the segments that we have.
You got a good sense in our analytical instruments, specialty diagnostics and our life science solutions businesses, there are a number of technologies that would be very complementary to what we have. And clearly, over time, will allow us to build out the portfolio. So it's going to be in the higher tech, more innovation driven parts of our business where really M and A dollars would be spent. And it leverages the very core strength we have in live products and services, which helps us accelerate growth in the things that we buy.
Great. And then another quick one, very encouraging to see increase the organic growth rate for the Life Science Solutions business. Can you maybe talk about what drove that conviction? In particular, it seemed to me like maybe you're spending a little bit less in R and D than maybe the historic life technology as a Maybe what gives you the conviction in that organic growth rate? Thanks.
Sure. Maybe Mark, if you'd like
to talk about the conviction on the 4% organic growth. I think the group here has heard a lot from me on it, so maybe a good opportunity for you and we'll pass the microphone to
I think there's a couple of things that really changed. As I outlined and I think Greg did a good job, the access to the additional channels and presence and customers we weren't at, really drives that change in organic growth. And So that's the real conviction that we get behind that change and just running the business slightly differently to focus on driving those segments. I think in terms of R and D spend, we're spending on absolute dollars about the same, but we've expanded the total amount of our business slightly more focused on where we're spending those R and D dollars to really focus on our innovation and return on that innovation and that's why you seem to change.
Hi, Derek J. Brown from Bank of America. So, Mark, The 4% to 5% organic revenue growth outlook for the 2016 2018, typically you say go to the midpoint of the range For that is when you sort of give guidance that's there. So that's quite a bit more bullish I think than historically I think people have looked at the company. So walk us through different segments in terms of, if you think of life sciences, AI, diagnostics and LPS in terms of where those segments should go for modeling purposes, just how we
Yes. So Derek, in terms of The 4% to 5% organic growth, the way I think about it, and you got a sense for last year, the segments actually grew pretty similarly. They're all very well positioned businesses. They have different drivers of growth. But when I think about it right now, we're assuming Life Science Solutions is at the fore end of that range.
If you look at the Specialty Diagnostics business, it's going to be a little bit on the higher end of the range. And I'd say the analytical instruments and lab products and services probably in the middle. That's how I think about it.
Great. That's helpful. So Thermo is sort of uniquely positioned in the fact that You have a genomics business, a proteomics business, metabolomics. I guess, and you're sort of talking about the cloud base. I guess, What are your longer term plans in terms of doing more like integrated omics offerings and sort of taking that forward?
And this is a question on bioinformatics spend and do you need to boost out your assets in that area?
Yes. So the first thing is, Tom Lowell mentioned briefly in terms of our R and D priorities, we do a lot of cross company leverage. We have a program called Intensifying Innovation. It actually takes our scientific community that understands the company's capabilities as a whole and pulls it together. So you'll see us over time, bring out a using some of our mass spec technologies, some of our genomic technologies solutions that I think will be quite compelling, leveraging the cloud in terms of how customers access the information.
So that's a high level example of it. So I think that's one that you'll see us take advantage of over time.
Hey, Mark. Tycho Peterson, JPMorgan. Just I wanted to follow-up on the earlier question And M and A, I understand your need to convey a balanced message here, but when you look at the current dynamics, you do have 2 consolidators that are kind of on the sidelines now Digesting acquisitions. Why do you kind of continue to emphasize bolt ons given the current low interest rate environment? Couldn't you be doing more in the near term?
Yes. So in terms of why bolt ons, first of all, as a $17,000,000,000 scale player, everything is kind of a bolt on in our industry, right? So, right, there's no other player other than the other 2 consolidators that are anything more than a fraction of our size. The reason that we call it the bolt on case is that while there are more scale M and A opportunities out there, they don't happen that often. And if the right one's there, you'll see us play.
And what I've said to many of our shareholders in the past, which is very hard to predict when the scale ones happen. We look at them. And when we feel like we're going to create shareholder value, we execute. We've done 2 very large transactions over the last 7 or 8 years. And I'm sure at some point in the future, there'll be more.
But I think it's good to get the assumption that we'll put $10,000,000,000 to work on the M and A landscape just picking up the fragmented players. And should there be more opportunities, we'll just take leverage up higher for short periods of time and capitalize on those as well.
Okay. And then a question on your comment on customer segments. You highlighted academic and small and medium biotech as an area of emphasis For 2015 and doing similar to what you did in pharma and then the reference labs previously. Can you explain what you're doing differently here? You've always talked about moving up the value chain with your customers.
So what are you doing differently in 2015 for biotech and academic that you haven't done before?
Yes. So the very different is actually we've scaled up our commercial team that's calling, representing the whole company as a unified capability to that customer set, right? So what the difference is, sure, we've been calling on those customers for many years. But what we're doing is like we used to do with our and still do with our big pharma accounts and med tech med device companies, we actually have dedicated a team that comes in, represents Thermo Fisher, helps that customer understand the full suite of capabilities and really drives growth. And I think you got a good example genomic health one, but we could have picked dozens of other customers to actually go through that same type of capability and say that Thermo Fisher is uniquely positioned to help me from everything from discovery all the way through the clinical trials management process.
Hey, Mark. Mark, can you hear me? Sure. Hi, Mark.
Doug, I recognize the voice.
You are right here. Thanks for taking the question. Doug Schenkel from Cowen and Company. So I guess it's one 4 part question on M and A. So as you kind of alluded to certainly throughout the presentation and in answering one of the last questions, Thermo is a lot bigger business It was certainly 7, 8 years ago and even 2 to 3 years ago.
So when you bolt together a large 4% grower together with a large 3% grower. It inherently becomes harder to move the needle 2nd question.
And you
did a good job talking about what you're doing to address that. But as we think about M and A, which has clearly always been a big part story and will continue to be a big part of the story moving forward. To hit that 4% to 5% revenue growth target that you 2nd part is, do these deals need to be inherently larger growth? So that's really the first part. The second part is, do you need to be more aggressively considering Divesting slower growth businesses to hit these targets really for the same reasons.
The third part is in terms of driving share appreciation, I These deals are supposed to be strategic, but they're supposed to create investor value, which of course is measured by share performance. Do you have concerns that M and A won't be as welcomed by the investment community and rewarded in the way it once was? I mean, if you look at Danaher Paul, Stock's done nothing and more broadly Endo Par hasn't been greeted the same way as deals were even a quarter or 2 ago. I mean your stock barely budged When it was reported in the journal that you were looking at Paul and kind of related to that third part of the question, how do you feel about
I think you got the answers already.
I mean the value can you hit your ROIC targets with valuation where they are right now?
So Doug, if I don't answer them all, then just ask the ones I missed. So it's not so starting out with growth and portfolio. We put the 4% to 5% organic growth up there assuming no M and A whatsoever, Right. So we don't need to buy anything. We don't need to sell anything.
We have no intention to buy anything or sell anything and deliver that rate of growth, right? So and if you look back at the roughly 100 transactions that we've done since I've been at the company, some of them are very fast growing assets. We've had assets that are very slow assets. That isn't the primary criteria of what we're doing. It's really about, is it going to strengthen the company strategically?
Are we are our customers going to absolutely value it? And will we create shareholder value. When I think about what we buy, we make those businesses grow faster. And I think Greg Harriman and Alan Miles give you a sense of how we do that. We have an incredible reach to the customer physically with our people, electronically and from a capability standpoint.
So when we buy something, we accelerate its growth, but it might be a fast growing business, it might be a slow growing business, right? So we don't think about M and A to change that. And when you look through all of our segments, they roughly grow at the same rate, right? Plus or minus a point. And when I think about the company, right, incredible stability, right?
FX is a challenge at some point. We had a global recession. We've had periods of rapid growth in the economy since this management team has been together. And we deliver really consistent growth and interestingly enough, incredible earnings power there. And that is the story.
And we pick and choose when we do M and A, right? And we pick and choose what we think will put an even brighter future. So to the question of investor sentiment and There was a period of time where we did a lot of M and A when anything got announced, it was a negative, right? The stock would go down to anybody, not just us, it would be a negative. Then we've enjoyed a period of time when whatever gets announced, the stock goes up a lot, right?
Before you've done any work, you get credit. And my guess is, is that We don't worry about those moments, but we worry about a year from now, 2 years from now, where our shareholders said, did we do the right thing? Are we creating shareholder value for the long term and executing against what we said we're going to do and do things like we did today, which is the Life Science Solutions upside case and say, you know what, we financed it on this, but across all the dimensions is better. So it's even better for our shareholders. So that's how I would think about the environment.
ROICs, the last of the question. There are transactions to do that clearly have rates of return well above our hurdle rates. There are transactions to do that would clearly be very accretive. There all of those types of transactions are going to have a more stretched ROIC than that typical year 3 or year 4 that is out there, right, that we've done historically. For us to want to do transactions with a longer time frame, we have to have a very high degree of certainty that in year what acts that it's going to be delivering what we think it's supposed to deliver at that point in time.
So a transaction with very high conviction that the growth and the earnings growth is there. We'd be willing to consider a longer payback. Very speculative transactions, no interest. So hopefully, that gives you a very broad answer on growth and ROICs and how we think about it. Sure.
Mark, Dan Arias from Citigroup. You talked about pricing and getting a little bit more out of price this year. Do you Do you think you could just sum up for us where in the business you think you have the ability to be a little bit more aggressive and then where if you look at customer budgets and competition, you think the price
Sure. So Pete, in terms of our assumptions on in the model, what do we have in terms of price? And then I'll give some of the details.
Yes. So what's in the model is somewhere around 50 basis points. On the upside case it might be a little bit more than that and That's really being driven by what we're doing to try to offset the impact of FX. So those regions where we have products that don't have local competition, where we have an opportunity to try to raise price to offset some of the dilution we're seeing from FX. We're planning on getting a little bit of benefit from that.
When we think about pricing, one thing that we don't calculate in that 50 basis points is the impact from innovation, right? Every time we launch something new, we're launching it at a higher price and capturing the value on it. So part of the way we capture price is actually just launching fabulous products. In terms of the same SKU year in, year out and you look at the portfolio. The areas where you're going to have great areas of opportunity, clearly in our life science solutions businesses, there's some great communities in terms of pricing as well as in certainly parts of our lab products business as well where we have very, very sticky customer base.
They really like working with us. Opportunities in those parts of our business. Sure. Ross?
Hey, Mark. Ross Muken from Evercore. So I guess it seems like we should rename the Q and A section, the M and A section. But I'm going to stick to actually the core business. So I thought it was interesting you I want to provide more detail on kind of the long term growth plan this year.
And as a part of it, there were a lot of machinations to make up for obviously the FX headwind that was incremental year on year. It It sort of strikes me that the sort of PPI business system and some of the other things you've put in place maybe don't always go appreciate it In terms of how hard it is to drive that kind of CAGR on a multiyear basis. So as you think about sort of The pushes and pulls of the economy and FX and all the other various pieces there. Do you feel like the company is now at a place to where On the macro environment or independent of the macro environment, independent of the timing of M and A and various things, You can kind of steer the ship through good and bad markets to kind of deliver on those targets because it seems like we had obviously This negative FX environment, which was unforeseen last year, and yet we're still roughly at the same number. And so how do you sort of feel about where you have the
We have a great management team.
I think you saw that today in the presenters, right? And when we presented the numbers last year, you had a high level of commitment that that's what we were going to deliver, right? And after May of 'fourteen, we picked up a $0.70 headwind, right? And what as the management team said is we're going to work to offset all of that, right? And in fact, the team was saying how do we get as much of that offset as talk, even in the year 2015, right?
And you see us in somehow we thought about our goals for this year. So an incredible level of commitment to do that. Because our business system is phenomenal, right? We even use the methodology, as Tom said, to actually say how we're going to figure out the best way to deal with it and what's the optimal way from price, work with your suppliers and manage out other costs to do that. So when I think about The environment, unless there's something that's incredibly dramatic and sudden, we feel like over this period of time, we should be able to deliver this type of numbers.
And there are scenarios that are more aggressive. And given that we've lived through 2 recessions over the last team years. We know how to deal with those environments as well, should they happen and incredibly bright future in terms of the core business we have.
And And maybe on the Life transaction, it feels like the messaging has changed a bit. We're kind of entering a new phase, accelerating growth, Which is quite different. I remember back to writing about this asset not long ago when it was standalone and people didn't even know if it would be a 2% to 3% grower, led maybe at some point grow corporate average. This is the largest deal the company has pursued at least under your leadership. As you think about all that went into getting this asset back to a more respectable growth rate and obviously also Getting the margins up.
What do you think you learned about the organization and the ability to kind of execute on something of this size and fix something that maybe wasn't broken, but Certainly didn't have all the same disciplines as the business now does. What did it kind of teach the organization about Where you can really add value and what really moves the needle and what really matters in this industry in terms of getting to kind of a competitive or above market growth rate?
The single biggest driver of the change in performance of the Life Science Solutions business is that the philosophy of integration. The vast majority of the colleagues pre acquisition our same colleagues at the organization today. They're just performing at a different level. So why is that? Thermo Fisher continues to evolve all the time.
Our job is to make this company the very best company it can be. And from day 1, we absorbed and soaked in every great idea that the life science solutions team had to make the whole company better, right? It wasn't you will do it the Thermo Fisher way, but what is the best way to run the combined entity to make the company stronger and more competitive. And when you go in that way from day 1, there's no resistance to say, you know what, there's some best practices coming our way. There's some changes in philosophy.
And we get it because this is about we're going to serve our customers well, we're going to gain market share, and we're going to win together. And you look at it, our Biosciences business is leveraging the channel incredibly well, using some different disciplines in terms of how we do R and D to really accelerate growth. The e commerce capabilities that Greg is articulating or articulated came from the Life Technologies capability. We're leveraging those capabilities to grow the company faster. And that philosophy has put the business on a much better path.
Yes.
Jeff Elliott from Baird.
Mark, a
question on the clinical trial logistics business. It's obviously Very good business for you. But when you look at the end market there, there's been a lot of changes with the Covance acquisition, some joint ventures. Does that impact your thoughts And what's really the growth outlook for that business over the next few years?
Sure. So our clinical trials logistics business, our biopharma services business, been a rapid grower. It is a business that has been historically a core capability within the biopharmaceutical industry, and they've outsourced it primarily to us. So we don't compete with the CROs. We have our $1,000,000,000 niche, if you will, that we are by far the industry leader.
And the reason that the pharmaceutical companies about the companies have used us is we're lower cost and higher quality, Right. And basically, we're just more competitive than the in house capabilities. So we've enjoyed good growth. And I'd say That business has been one of the faster growing businesses, growing well above the company average for long periods of time and continues to have very bright future, Jeff. Sure.
Isaac. Hey, Isaac Ro from Goldman. Thanks. I apologize, I want to just drag conversation Back to M and A just for a minute. But hopefully talk a little bit more long term.
A lot of what you talked about today was sort of on a 3 year basis. But if we look on a maybe 5 to 7 year I was curious, at a very high level, I think one of the things that's interesting is over the last year in Healthcare, you've seen some pretty interesting deals across sectors, right? So Becht Fusion, you had United, Catamaran, you had some deals that people would not have expected. And just at the size that you're now at $18,000,000,000 in sales and $100,000,000,000 addressable market, If we look past the point over the next few years where you bolt on and backfill some of the white space you have, would it be inconceivable to think that you guys might add a 5th leg to
We serve an incredibly attractive market with huge opportunities to grow. Our focus is to continue to run what we have in a world class fashion, create a huge amount of shareholder value. And when the right transactions happen in our space, we'll pursue them. And there are I think that will keep us busy for quite a period of time. So when it gets closer to that 5 to 7 years out, it'll be we'll see where we are from a market share and look at those.
But we'll be plenty busy, Isaac, in the space that we're in today.
That's helpful. And then maybe just a follow-up more specifically on diagnostics. If we look at the rest of your portfolio, you have 3 dominant central positions in every part of the lab where you play. But in diagnostics, I would argue that you maybe have a little bit more of a tactical positioning. In the past, when I thought about your philosophy there, it didn't seem to centrally revolve so much around having large instrument, the way some of the other diagnostics Is that philosophy still hold?
How do you think about kind of really dominating the same way you do in other lab markets?
Yes. We're to make money. So the way I think about it is the assets we have 2, our very defendable, as Andy said, great niches, but many of them have very high market share. And the point of that, and the portfolio has been logically put together, is we wanted to be in every major medical center around the world. And when you think about our allergy business as an example, microbiology business.
These businesses are there, right? So these are our customers. And basically, we then are able to leverage it there is a convergence of life science tools into the diagnostic realm, we have the commercial footprint to really tap into. So that's how we thought about it. We always think about industry structure, and there have been segments historically in the diagnostics realm that we've just avoided because we see it as commoditizing.
And therefore, we want to make sure that our business looks even better in the future. And therefore, we try to pick the spots where we like how the industry is playing out.
Yes. Mark, this may be for Mark as well. The comments you made around gene sequencing, is this more reference to the technology than we've seen in the past or And specifically, are these 600 new panels you're talking about proprietary or being done in conjunction with partners?
Sure. So Paul, the next gen sequencing area is an exciting area. And I'll have Mark talk a little bit more about it. But we basically have been very quiet on it deliberately because our view is today, it's a little more than 1% of the company's revenue. Very exciting field.
We put a lot of R and D there to develop it. But we don't want to overemphasize it from an investor standpoint. But from a customer standpoint, we're incredibly focused on it.
I would just add on the panel part of it. So just sort of explaining, I think it's not well understood sometimes the actionability of taking all the information This is betting discovered by the large scale discovery programs and putting into actional programs on sequencing specific genes. And that's the explanation we just wanted to give today to make sure some of our customers see that, but just to explain that to the group here.
Miroslava Minkova with Stifel. Thank you for taking the question. Maybe if I could ask what are the under assumptions for the end markets before the behind the 4% to 5% target that you just put out today and what has changed Since last year, you made a strong point that the 3% is off the table. And help us lay out the scenario as to what can push you to the upper end of that range.
Yes. So end market long term end market growth is the same as last year, same as last few years, 3% to 5%. Underlying the 4% to 5% would be a 3% to 4% market growth over this period of time. So our assumption here is that we're always gaining a little bit of share. So if we were in a period where you're at the high end of the market growth, then you'd see us obviously move higher on the organic growth targets.
But I think the 3% to 5% gives you a good sense of market and 4% to 5% is generally where we think we're going to come out. The reason our confidence is in the 4% to 5% is the business is performing well. We're delivering in that range. We've made a lot of investments to leverage our value proposition, our innovation and our great strength in emerging markets. And I think that positions us well to gain market share.
So I think all of that combination gives us an incredibly bright future. So let me thank you for joining us again this year. And I was asked a question last week at an investor conference, which show was the last question I had then, and I'll posit that question, which was what's the most misunderstood thing about Thermo Fisher Scientific. And at that point in time, I said our future has never been brighter. And I think we might have demystified that a little bit today, why we're team.
So confident in why our future looks so incredibly well. Thanks for the interest, and we look forward to keeping you updated on our progress.