Good morning. I'm Ken Berger, Vice President of Investor Relations with Thermo Fisher Scientific. On behalf of the entire Senior Management Team, I want to welcome everyone to our 2011 Analyst Meeting. We're excited to be here today to update you on our progress, as well as the exciting plans that we have for the future. Before we get started, let me just quickly cover today's program. As you can see on the agenda, we're going to have a presentation from our CEO, Marc Casper, our CFO, Pete Wilver, and our five primary business leaders. We're going to take a short break in the middle of the program, and then Marc's going to come back up at the end of the formal presentations, and we'll take questions. We'll wrap up the program right about noon.
Please note that today's event is actually being webcast live, so when we get to the Q&A portion of the program, I ask that you please raise your hand, wait for the microphone to be brought over to you, go ahead and state your name and your organization, and then ask your question. Also, one other administrative item, if you could please mute your cell phones and electronic devices, that would be very much appreciated. One last administrative item, let me cover our safe harbor and non-GAAP disclosure language. Various remarks that we may make in these presentations about the company's future 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 on Form 10-Q, under the caption "Risk Factors," which is on file with the Securities and Exchange Commission and available in the Investor 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 presentations 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 income, adjusted operating margin, 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 under the heading "GAAP, Non-GAAP Reconciliation and Financial Summary" in the Investor section of our website, thermofisher.com. All adjusted items in these presentations include pro forma stock option expenses if it had been required in all periods. For 2006 through 2010, all items in these presentations have been adjusted to present the results of Athena Diagnostics and Lancaster Laboratories businesses sold on April 4, 2011, as discontinued operations. It is my pleasure to introduce our President and CEO of Thermo Fisher Scientific, Marc Casper.
Thanks, Ken.
Good morning and welcome. We're very pleased that you're here with us today in New York City, and I think you'll find the morning to be full of a lot of information about the company that we're very excited to share with you. As we sit here in May, it's been a busy start to the year, and we've made a lot of progress, and we'll be pleased to talk about that as we get through the discussion this morning. This meeting is all about how we're going to create value for our customers and for our shareholders. You'll hear about how we're creating value through innovation, where we have an incredible track record, and we'll talk about our future plans. You'll hear about how we're building value for our customers by expanding our presence in emerging markets and helping them as they have their expansion plans as well.
You'll hear about how we're creating value through leveraging our balance sheet and deploying our strong cash flow to do share buybacks and build a bright future for the company through strategic acquisitions. I'll touch on some examples of this this morning, and you'll hear more about it from our senior executive team throughout the session. For me, I've been with the company about 10 years now, and I have to say I couldn't be more excited about the prospects than I am right now. It's an incredibly bright future for the company, and I think you'll get a sense of our enthusiasm this morning. I want to start with a slide that we have never shared externally, but we use a lot internally, which is, what's our vision? What's our goal for the decade?
It's something that we launched with our team at the very beginning of January 2010, and it's well understood with the company. What it really does is sets out how we're going to measure success for the long term. When you look at it, our goals for the decade are, you know, first, continuing to advance our industry leadership. We obviously started the decade as an industry leader, and we want to make sure that our actions continue to advance our position. Second, that we'll continue to strengthen our industry-leading brands and ensuring that Thermo Scientific and Fisher Scientific continue to be the most powerful brands in our industry. We'll make sure that we develop innovative technologies that have a profound benefit to our customers in life sciences, healthcare, and the environment. We'll significantly enhance our presence in Asia-Pacific.
We'll become one of the most admired companies in terms of a place to work, and throughout the period, we'll deliver strong and consistent earnings growth throughout the decade. That's how we're framing success, and now we'll use that as a little bit of context for the progress report that you're going to get today. We are the world leader in serving science. When you look at us today, our leadership benefits from the unique scale position and the unique depth of capabilities that we have, and that further distinguishes us in the marketplace. For us, it's even more important how we leverage our scale, depth of capabilities, and premier brands to create value for our customers. I'll touch on these advantages later in my presentation. My colleagues explain the exciting growth prospects that they have in their parts of the business.
One of the great things about the company is our mission. You've seen this slide in some form over the years, and when you look at it, you know, we enable our customers to make the world healthier, cleaner, and safer. We're helping our customers do truly remarkable things. From a healthier perspective, our specialty diagnostic products are used by doctors every day to accurately diagnose patients and make decisions to help patients make the right lifestyle choices. From a cleaner perspective, we're well known for our position in air quality monitors, but with the acquisition of Dionex, we now have similar strength in terms of water quality testing capabilities. Safer. I'm very proud of the fact that our radiation monitors were used to ensure the public's safety in Japan after the natural disaster happened and the issues with the Fukushima reactor happened.
We do important work with our customers, and that mission really gets all 37,000 of our colleagues incredibly energized to be their best every day. From our perspective, this mission makes sure that we're relevant to our customers and society as a whole. We fulfill, you know, when we think about the mission and meeting the needs of our customers, it's a complex world, and we're making decisions all the time about how our technologies, how our capabilities are meeting the evolving needs of our customers. When you look at our financial performance, I think it gives you a good indication that we've made the right choices about the technologies that we have, about the acquisitions that we've done, about the commercial expansion plans that we've executed.
Since the creation of the company in 2006, we've grown our revenues by 6% from a CAGR perspective, and we've tripled that, or nearly tripled that, in terms of our adjusted EPS at 17% growth over the period. It's, from our perspective, a track record that gives us great confidence for the future. When you look at the company's serve markets, we serve, you know, four sets of customers: pharma and biotech, academic and government, industrial and applied, and healthcare and diagnostics. That $11 billion of revenue is roughly divided equally amongst those four customer sets. What's interesting is that those, you know, markets we serve really serve, you know, have really incredibly bright prospects from a trend perspective. These are the very high-level macro trends that drive growth in our business.
You'll hear more about the details of these trends and some of the sub-trends underneath them from our group presidents as we get into the session. When you look at it, you know, this gives us confidence that the growth in this industry is going to continue to do well and that we're well positioned to capitalize on it. Starting out with the very most macro trend, aging population and increasing access to healthcare around the world clearly drives demand for our customers in the pharmaceutical and biotech area, as well as academic and government research, and clearly in healthcare and diagnostics. It's a very important macro trend for us.
What you're seeing as those demands increase is that there's more and more of a convergence of life science tools and diagnostic applications, and we are best positioned to take our analytical technologies and migrate them to new applications in the clinical arena. Clearly, most companies are facing the opportunities associated with accelerated growth in emerging markets, and given our unique scale there, we're very well positioned to capitalize on that growth. Today, you'll find us using our technologies to ensure that the cement that's used to build the roads is of the right quality to the support we give our pharmaceutical customers in those markets with lab equipment and instrumentation to allow for new research being done in India, the Chinese, the Southeast Asians of the world. The next trend is around, you know, the growth in emerging markets and the importance of safety and environmental protection.
When you look at it, there's clearly been a big push towards consumer product safety, food safety, and the protection of the environment. We're well known for our capabilities in that arena, and that clearly is an area that will benefit both our academic, government, and industrial and applied customers. Finally, the world's become a lot more competitive, and that competition has allowed all customers or demanded all customers to be more competitive and get more return on investment that they have from the decisions that they're making. Our unique value proposition puts us in a position to help them drive their productivity objectives and make them successful in their endeavors. You'll get a good sense of how we enable productivity for our customers throughout the day. When you look at the company from an internal perspective, we have the most comprehensive offering in our industry.
From our perspective, it's the best of both worlds. Analytical technologies represent today a little over 40% of our business, and with the additions of Dionex and Phadia, this segment will continue to become a larger proportion of the total. Our offering in analytical technologies is focused on innovation to solve the most complex challenges from an analytical perspective that our customers have, as well as to improve diagnostics. Laboratory products and services represent a little bit under 60% of our company's revenue, and here it represents our unique capability to really make the lab more productive, make it easier for our customers to achieve their productivity objectives, and strengthen their ability to compete. Let me delve into our two segments in a little bit more detail. Analytical technologies, let me start there. In analytical technologies, we have three growth platforms: Analytical Instruments, Specialty Diagnostics, and Biosciences.
You won't find all of these capabilities in any one company. We like this combination because these businesses serve high-growth markets, and really, innovation makes a difference. You'll hear more about the opportunities here from Greg Herrema, Ken Berger, and Alan Malus. Given the great opportunities to innovate in this segment, it's where we spend the bulk of our R&D. In fact, we spend about $245 million annually in this part of the business, or about 80% of our total company spend. You know us for the first air quality monitors, for the first ion traps, for inventing the Orbitrap, for the new drugs of abuse tests that we continually bring out. Innovation here is critical. I'll talk more about what's next a little bit later in my presentation.
We've been augmenting our capabilities in analytical technologies through acquisition, and we have a very strong track record here of building out our capabilities and integrating them successfully. Businesses like Niton and B·R·A·H·M·S and Ahura Scientific and Fermentas, Finnzymes, and now Dionex and Phadia all reside in this segment. Looking forward, we have tremendous opportunities to connect these capabilities and take advanced research technologies to new applications in the field or even in the clinic. Turning to laboratory products & services, here we're known for the incredible commercial strength and global reach that we have. At several times larger than our next nearest competitor, I can say with confidence that we have no peers in our industry. This segment also consists of three growth platforms, and I'm proud to say that we hold the number one market position in each of these segments.
In laboratory products, we are the leader and by far the largest provider of lab equipment and consumables, everything from freezers and centrifuges to the lab consumables used every day and in every lab experiment. In our customer channels business, we're known for our catalogs and our world-class e-commerce capabilities that's ubiquitously used across laboratories around the world. In biopharma services, we're the leader in clinical trial logistics and packaging. We handle more experimental medicine than any company globally. When you add it all together, we have an unmatched set of capabilities that allows us to drive productivity for our customers. You'll hear more about this segment from Alan Malus and Ed Pesicka later this morning. At this point in my remarks, I want to do a brief recap.
On our scale and our depth of capabilities, our global presence positions us like no other company in the markets that we serve. Our combined strength as a world-class innovator and a productivity partner gives us a great advantage over the competition. We have a rich value proposition, and that sets us apart and gives us great opportunities to help our customers achieve their objectives. Our strong financial results over time give us great confidence in the fact that our strategy is working, and we have a very good set of prospects going forward as well. I've reminded you of who we are and how we've become the leader in our space. In the balance of my presentation, I want to focus on our key financial goal and how we're positioned to achieve it over the long term.
Our primary financial goal is the one that we've been talking about consistently over the last year since our analyst meeting, which is to consistently deliver strong EPS growth. We believe that EPS is the best measure of our overall performance. It's a metric that makes sense because it emphasizes how well we drive revenue growth, margin expansion, and capital deployment. It's a reflection of the major activities that we're executing on within the company, both organically and inorganically, and it reflects our overall success. The other point I want to make is that we also focus on the word "consistently." What I mean by that is we're not just focused on this quarter, but we're making sure that we're able to do it consistently for the next quarter and for years to come. This chart should look very familiar.
It's the proven formula we've used for many, many years to drive our EPS growth. It's really based on our track record in three areas: revenue growth, margin expansion, and capital deployment. When you look at the elements at a high level, from a revenue growth perspective, we're focused on leveraging our unique value proposition, our innovation leadership, as well as our presence in emerging markets. From a margin expansion perspective, driving productivity, benefiting from volume leverage, and capturing the acquisition synergies that we sign up every time we do a transaction. From a capital deployment perspective, continuing to benefit from the complementary acquisitions that we've done, as well as our share buyback program. I want to touch on some of these in a little bit more detail, and I'll focus on innovation, emerging markets, margin expansion, and capital deployment. In terms of innovation, we're the leader in our industry.
We have an incredible track record here. In fact, it's one of our core values within the company. It was the basis of why this company was founded 55 years ago, and it's the pillar of who we are. We commit a good portion of our resources to R&D, and we fueled a continuous pipeline of high-impact new products. You can see on the chart on the left that this has been a consistent investment. Even during the recession of 2009, we spent roughly at the same level as pre-recession. We did that because we had great confidence in the pipeline that we were working on and the prospects for those products to have an impact.
Coming out of the recession in 2010, we said we would have a two-year program to increase R&D expenditures because we liked our prospects to a great degree, and therefore you've seen us ramp up R&D to a level that we're very comfortable with and expect going forward that R&D will grow more just in line with our sales growth. When you look at it, those decisions have positioned us incredibly well. By staying steady and investing in R&D, the products you saw launched in March of 2011 really are the results of that strategy. We had a great Pittsburgh conference where we focused on our chemical analysis products with a great set of launches in molecular and elemental spectroscopy, as well as creating a whole new category of products, which is shown by the Niton FXL, which is a portable laboratory.
You see here in a very slightly disguised version, because I don't want to steal Greg 's thunder or give away something that we're going to do at ASMS in two weeks' time, which is the primary show for mass spectrometry, the three new products that we'll be launching the first week of June. I'll simply call them a new ion trap, a new Orbitrap, and a new product that doesn't exist at all today, which is the Q Orbitrap. I have complete confidence that these will be the showstoppers in Denver in June, and clearly this will be the best ASMS ever. The second driver of growth is our scaling up in Asia-Pacific. Today, emerging markets represent about 13% of the company's total, about $1.3 billion. It's a large number, and we're a leader in our space.
The way we look at it is we're still underpenetrated, and we have great opportunities for growth. We're very focused on building our presence in China, in India, in Korea, and other markets in Asia-Pacific as well. Given that China is our largest market in the region, I thought I'd delve into a little bit more detail to give you a quick snapshot of where we are today. We do about $400 million in revenue. We have 1,600 incredible employees that's growing. We moved our environmental instruments headquarter there a couple of years ago to be closer to the customers, and we feel good about that decision because it's allowing us to be very much engaged with the regulatory bodies there. We opened up our China technology center last August, which is allowing us to develop tailored products for the local market. In fact, we have our fifth factory underway.
This factory is going to be 100% dedicated to serving the local market. As most companies started in these markets with export, now we're growing so quickly that we're going to have a dedicated facility for the Chinese market. For us, growth we expect to be about 20% in China this year. You'll hear a lot more about our prospects for Asia-Pacific from Syed Jafri later this morning. The second big driver of our EPS growth is margin expansion. Here we have a great track record. Since 2006, we've averaged 70 basis points of improvement in operating margins a year. Looking at 2011, we expect to achieve high teens operating margins, and we expect to be able to get into the low 20s very much in the near term in terms of operating margins. Peter will go into that in more detail in his presentation.
When you look at the levers that we have, we're very focused on capturing price, benefiting from the volume growth that we have, as well as using the core operating methodologies we have at the company, the well-ingrained PPI and PPI lean continuous improvement programs, our global sourcing capabilities, our low-cost manufacturing network, and our facility rationalization approach. We have multiple levers that we can pull to drive margin expansion, and each year we optimize those levers to ensure that we're driving the appropriate profitability growth. The final aspect of driving our adjusted EPS growth is around our strategy for effective capital deployment. When you look at it, it's a combination of complementary acquisitions and return of capital through share buybacks. There's nothing on this slide and the subsequent slide that is new. There's no tonal difference that I'm making, so if you hear something different, there's nothing intended.
This should be very, very comfortable to you in terms of what our capital deployment strategy is. From an acquisition perspective, as a leader in the space, we look at the landscape actively, but we're incredibly selective and disciplined in our approach. We use a stringent set of criteria. We strengthen our strategic position, and acquisition has to do that. It has to enhance the company's value proposition for our customers, and it absolutely has to create shareholder value. When a deal will fit those three criteria, then it's something that, you know, we're going to be interested in pursuing.
When you look at it, we acquire businesses in all six of our growth platforms, but primarily our focus is in our analytical technology segment because in analytical instruments, specialty diagnostics, and biosciences, those businesses have very strong growth prospects, they're innovation-driven, and they leverage the depth of capabilities that we have as a company. Over the last 18 months, we've made acquisitions in all three of these businesses, with Dionex and Phadia being the most recent examples. Since the beginning of 2010, we've authorized $2.25 billion of share buybacks. We've spent $1.5 billion of that authorization through the first quarter of 2011, and it's our expectation that we'll spend the remaining $700 million between now and February of 2012. In the same timeframe, we've completed $2.8 billion of acquisitions that add about $700 million in revenue to the company, including the acquisition of Dionex, which we closed last week.
These acquisitions increase the depth of capabilities that we have as a company, clearly strengthening our strategic position and adding value for our customers and our shareholders. When you look at them, Finnzymes and Fermentas helped us position ourselves well to capture the exciting growth in PCR/qPCR workflows. Ahura Scientific strengthens our position in portable and handheld analyzers. Dionex positions us to be a chromatography powerhouse, and Phadia expands our position as a leading specialty diagnostics player. You'll hear more about these acquisitions from our group presidents a little bit later in the session. When you look at it, that's the formula that we've talked about. From revenue growth to margin expansion to effective capital deployment has allowed us to consistently drive significant earnings growth. We've averaged 17% growth over the period.
We feel very comfortable with our ability to deliver 17 %- 20% growth this year, and over the whole period, pretty much in every year, we've been able to deliver mid-teens adjusted EPS growth. I think this is really a testament to how effective our strategy has been. I think you have a good idea at this point about our growth prospects and how we believe it's our best measure or what our best measure is of success. Before I wrap up, I'd like to take a quick look at how our company looks from an investment perspective. Here's a snapshot of how our 17%-20% adjusted EPS growth goal for 2011 compares to a select list of peers and competitors, and how our EPS growth expectation translates into a PE ratio.
As you can see, our EPS growth guidance for 2011 is at the high end of this group, yet it hasn't fully yet translated into a superior PE multiple. I acknowledge this is a very simplistic analysis, but as we look at it, we see our company as being made up of businesses that have stronger positions than the Sigmas, the Waters, and the Kyojins of the world, with the added benefit of our industry-leading scale and depth of capabilities. Let me wrap up by saying, you know, we clearly are the undisputed leader in our space. I'm repeating the slides because I think it does a good job of summing up how we create value for our customers and for our shareholders. You'll hear more from our colleagues this morning about what we're doing to create value that leads to growth.
We feel that we're far better positioned than our competition in the individual markets that we compete, and when you put all of our capabilities together, we simply have no equal. Thanks for listening this morning. I'll return at the end of the session to lead the Q&A portion of our program. Now I'd like to introduce Pete Wilver, our Chief Financial Officer, who will cover our financial highlights and our outlook for 2012 and beyond. Thank you.
Thanks, Marc. Good morning. It's great to be here with you today to talk to you about Thermo Fisher Scientific and how we're executing to achieve our financial goals. As Marc explained, we're continuing to build on our industry leadership to create shareholder value by consistently growing adjusted EPS, which is our primary financial goal. Today, I'll cover our strategies for achieving our 2011 financial goals, as well as our 2012 outlooks and longer-term growth goals. Specifically, I plan to answer the following questions: How do we continue to drive revenue growth in our two segments: analytical technologies and laboratory products and services? How do we leverage productivity to drive sustainable margin expansion? What are our future plans for capital deployment? Finally, how does all this translate into consistently delivering strong adjusted EPS growth in the near and long term?
As a reminder, in early April, we closed on the divestitures of our two laboratory testing businesses, Athena Diagnostics and Lancaster Laboratories, for proceeds of $940 million. Financial results for these two businesses are reported as discontinued operations for all periods, so I've excluded them from my presentation. Last week, we closed on Dionex, so I've included their results in our financial guidance and outlook. Finally, as Marc mentioned, we announced the acquisition of Phadia last week. I'll give you some insight later in my presentation into how that may affect our financial projections, but since the acquisition hasn't yet closed, I've not included Phadia in our 2012 or longer-term financial outlook. I'll start with a recap of our most recent guidance for 2011, which we outlined on our Q1 earnings call in April.
The 2010 actual results shown here, as I mentioned, have been restated to exclude Athena and Lancaster. The assumptions we factored into our guidance remain unchanged, and I'll provide more detail in the upcoming slides, but this is the high-level view. Our adjusted EPS guidance range translates to 17%- 20% growth over the prior year. On the top line, our revenue guidance range is $11.52 billion- $11.62 billion, which represents 9%- 10% growth over our 2010 revenues of $10.57 billion. Organically, it represents growth of around 4%. We're targeting adjusted operating margin in the range of 18.1%- 18.4%, which would result in margin expansion of 65 basis points- 95 basis points.
Free cash flow is expected to be in the range of $1.3 billion- $1.4 billion, which is 8%- 17% higher than last year as a result of increased earnings and effective working capital management, partially offset by moderately higher capital expenditures. Finally, our adjusted EPS guidance range of $4.05- $4.15, which, as I said, represents 17%- 20% growth over our 2010 adjusted EPS of $3.46. Listed here are the five key drivers of our 2011 revenue growth. Our commitment to continued investment in research and development during 2009 and 2010 resulted in a successful launch of an array of new high-impact products this year, which you'll learn more about from Greg and others. Our growth investments in Asian markets, such as China and India, are clearly paying off and should result in strong double-digit growth this year.
As Syed will show you, we're also using our commercial strength and localization to accelerate our growth in Asia. We'll continue to drive organic growth by leveraging our unique value proposition, which is where our unparalleled depth of capabilities continues to provide us with exclusive opportunities to grow with existing and new customers. In terms of pricing, we're expecting a little bit less than 1% growth this year, similar to our results in 2010. We're also benefiting from the strategic acquisitions we've completed over the past couple of years, both in terms of reported and organic revenues by acquiring higher growth businesses and realizing revenue synergies. Combined, these strategies position us well to achieve our revenue growth goals in 2011. This is our revenue growth trend by segment from 2006 through 2011 in terms of our guidance range.
Our analytical technologies segment is a leading technology innovator with a rich depth of capabilities in analytical instruments, specialty diagnostics, and biosciences. This segment has been growing at a compound annual growth rate of 8%. Our laboratory products and services segment is focused on creating convenient access for our customers to the most comprehensive offering in the industry. This segment has been growing at a compound annual growth rate of around 5%, which, as you know, has been negatively affected the past few years by the termination of our supplier agreement with Biosite. Although the growth drivers by segment are somewhat different, the point here is that we have a company that's very well known for innovative products, applications expertise, and an ability to drive productivity for our customers. Following my presentation, each of our operating leaders will talk to you about the growth prospects for their specific businesses.
You'll see that we're positioned in markets with a solid growth profile, and also that despite our scale and industry leadership, we still have plenty of room to grow. When you add it all up, our unmatched scale and depth of capabilities provide us a unique opportunity to capitalize on market growth trends. Our strong productivity culture within Thermo Fisher is a key enabler for us to continue to expand our margins. We continue to manage our costs and discretionary spending tightly so that we're able to invest in the things that are of the most strategic importance and have the highest growth impact. We deploy world-class business processes to drive down our cost position, and we've been doing so for over 10 years now. Here's how we do it. We're very focused on reducing our footprint.
In terms of facility rationalization, since 2006, we've increased our revenue per manufacturing facility by 32% to $50 million per site. We typically close about 8- 10 factories per year and drive $2 million- $3 million of annual savings in that process. We've made great progress here, but we still have a lot of untapped productivity yet to realize from this activity, given that we still have over 130 manufacturing facilities, which is more than we need. Moving to the right, we're driving more of our manufacturing to low-cost regions, allowing us to reduce our total cost base and be more responsive to local customers. Our major low-cost region facilities are located in China, Mexico, and Eastern Europe. Last year, we produced $500 million of our revenue in low-cost regions, and this year we expect to do about $600 million.
We typically save about 20%- 30% on every dollar of revenue that we move to low-cost regions, so it's a meaningful productivity driver for us. Only about 10% of our manufacturing revenue is currently coming from low-cost regions, so we still have a substantial opportunity to drive further cost reduction in this area as well. Moving down and to the left, our Practical Process Improvement Program, or PPI, helps us not only to reduce costs but improve quality and customer satisfaction as well. We complete over 1,000 projects every year, and whether it's the big picture issues or the small challenges we face every day, our teams across the globe are consistently looking to improve our efficiency. In 2010, we realized over $75 million in savings from our PPI and PPI lean efforts, and we expect comparable savings into the future.
Finally, moving to the right, we continue to realize savings from our global sourcing efforts. Each year, we establish the goal of mitigating all the effects of purchase material inflation, as well as driving substantial incremental savings. We have a great track record. Last year, we drove $65 million in savings, which far exceeded our direct material inflation. We achieved these savings by aggregating our spend, reducing our supply base, and using e-sourcing techniques. We've also been shifting to low-cost regions from a sourcing perspective, in addition to our low-cost region manufacturing strategy. Through all these actions, along with volume leverage and pricing, we delivered 80 basis points of margin expansion in 2010 to 17.4%. As I said, we have plans to increase our operating margin by 65 basis points- 95 basis points this year, which will continue to be driven by these efforts.
This is the bridge of our 2010 adjusted EPS of $3.46 to our 2011 guidance range of $4.05- $4.15. We start off with a $0.30 headwind for direct material and wage inflation. We have a net positive impact of about $0.19 from below-the-line items, mainly driven by our lower average share count as a result of our share buyback activity. We expect revenue growth to contribute between $0.33 and $0.39, which includes the positive contribution from price and volume leverage and favorable FX, which is based on April 2011 foreign exchange rates. We estimate that our strategic growth investments in R&D, Asian commercial resources, and information technology, such as our enhancements to our web presence, will dilute our earnings per share in 2011 by about $0.15. The combination of our ongoing productivity and global sourcing initiatives, which I just discussed, will contribute between $0.43 and $0.47.
Finally, our acquisition of Dionex is expected to add $0.09, which includes the related financing cost. Overall, we have balanced contribution from growth and productivity while funding our strategic investments for the long term. Here are some of the key assumptions we included in our 2011 financial guidance. I covered most of them recently on our Q1 earnings call in April, so I'll just highlight a few. In terms of revenue guidance, our guidance assumes foreign exchange rates as of April, as I said, which would have a favorable impact of about 1.75% positive on our revenue growth. We also pick up about 4% growth from closed acquisitions, which includes 3% from Dionex. We have about a 1% headwind organically combined from the Biosite termination and Q1 Japan stimulus orders last year.
Our net interest expense is expected to be around $120 million, which is up $50 million year-over-year as a result of the Dionex financing. Finally, our assumption is that we'll spend the remaining $700 million of our existing $750 million share buyback authorization through February 2012. This would result in full-year average diluted share count estimate of around $385 million -$390 million shares. Now I'd like to take you through our capital deployment strategy. We believe in deploying capital that creates shareholder value both in the short and long -term. Our industry remains highly fragmented, and we continue to see a healthy pipeline of opportunities to further enhance our leadership position through M&A. We're able to create value by efficiently adding fully developed technology capabilities and leveraging them within our extensive customer reach.
We consider our acquisition, due diligence, and integration processes to be a core competency within Thermo Fisher , as evidenced by our strong track record of successful integrations and realizing acquisition synergies. We're disciplined buyers, and our focus is on creating value. Our key valuation metric is internal rate of return. In general, we use a hurdle rate of around 10%, which exceeds our weighted average cost of capital, and our goal is to retain as much of the synergy value as possible. We also look at return on invested capital to assess how quickly it accelerates through time. Less important but valid reference points are revenue and EBITDA multiples and EPS accretion and dilution. You've seen us make a number of acquisitions, and regardless of size, the same metrics apply. Return of capital is also integral to our capital deployment strategy.
As Marc said, we've authorized $2.25 billion in share buybacks since 2010. As I mentioned earlier, we had $700 million remaining at the end of Q1 on our current authorization, which we expect to use through its expiration in February 2012, even with our pending acquisition of Phadia. The graph on the right shows that from 2009 through 2011, we expect to have generated $4 billion in free cash flow and to have deployed $6 billion in acquisitions and share buybacks, excluding our $3.5 billion pending acquisition of Phadia. You can see that we're effectively deploying our capital to make strategic acquisitions and buy back shares, putting our strong cash flow and balance sheet to work to create shareholder value.
In terms of our balance sheet, if you look at the far right column, which represents our first quarter 2011 balances, you'll see that we had $2.8 billion of cash and $4.3 billion of total debt, resulting in net debt of around $1.5 billion. Since then, we've closed the Dionex transaction, which consumed $2.1 billion of our cash. We also redeemed the remaining $300 million of our convertible debt for $450 million in cash and received the net proceeds from the Athena and Lancaster divestitures. Our total debt, as well as our leverage ratio, has essentially doubled since last year as a result of the Dionex transaction. As of first quarter, our total debt to trailing 12 months adjusted EBITDA was 2.1 x, up from 1.1x at the end of the year. Last week we announced our intent to acquire Phadia for approximately $3.5 billion.
This would take our debt to a total of about $7 billion, or a leverage ratio of 2.8x pro forma total debt to trailing 12 months adjusted EBITDA. We're comfortable with this leverage ratio, and all three rating agencies confirmed our A-level ratings last week, but our intent is to use a portion of free cash flow to pay down debt following the acquisition's close. At Thermo Fisher , we use return on invested capital to measure our effectiveness of internal investments, such as R&D and capital expenditures, as well as external investments, such as acquisitions. This chart shows the trend of our after-tax adjusted ROIC from 2005 through 2010. You can see we've consistently delivered high single-digit returns. In 2006, the metric declined as a result of the Fisher merger, which added a significant amount of market-based capital to our balance sheet.
Since the merger, we've improved our return by 200 basis points to 9.3%, above our weighted average cost of capital. Of course, this metric only reflects current period returns and not the future earnings potential of our internal and external investments, which will drive improvement into the future. Now I'd like to move on to our discussion of our financial model for 2012. Our focus is to continue delivering strong adjusted earnings per share growth in 2012. We're anticipating adjusted earnings per share growth of 13%- 15% without including Phadia. The 13%- 15% adjusted EPS growth assumes organic revenue growth of around 5% and stable foreign exchange rates. We're expecting a modestly stronger economy next year, and we'll continue to drive growth through our new product introductions, expansion in emerging markets, and acquisition revenue synergies.
Moving to operating margins, we expect to drive margin expansion of 60 basis points- 100 basis points through volume leverage, our continued commitment to operational excellence, and acquisition cost synergies. We've assumed material and wage inflation similar to 2011. As for 2012 free cash flow, our goal is to generate at least 90% of our adjusted net income while maintaining capital expenditures at approximately 2011 levels. We expect our adjusted tax rate to be in the range of 21%, about 50 basis points higher than 2011, primarily as a result of higher income at marginal rates, partially offset by a full year of Dionex tax synergies. Finally, our model assumes that we'll allocate 50% of our free cash flow to share buybacks, and it excludes Phadia and any other potential future M&A.
As we announced last week, we expect Phadia to be accretive to our 2012 adjusted EPS by $0.26 -$0.30. Depending on when it closes and how accretive Phadia is to our 2011 adjusted EPS, we expect the $0.26- $0.30 would add approximately 4 %- 5% to our adjusted EPS growth in 2012. If you include Phadia, this would bring the total year-over-year growth outlook in 2012 to 17%-20%, matching our very strong 17%-20% growth in 2011. Finally, I'd like to share with you our longer-term outlook. In our base case, we expect annual adjusted EPS growth in the mid-teens, driven by mid-single-digit organic revenue growth and 50 basis points- 100 basis points of margin expansion, with a near-term goal of achieving adjusted operating margin in the low 20s.
Depending on economic conditions, our investment profile, and product development cycles, we may be at the higher or lower end of these goals in any given year. Over the long term, we believe that they're very achievable. As we've demonstrated in the past, we do see some upside to our base case scenario. We have the potential to pick up incremental revenue growth through higher returns on our strategic growth investments. As I said, we've recently been investing in higher growth acquisitions, and we have the opportunity to continue this trend, which would be accretive to both our top and bottom line growth. In addition, given our strong and growing free cash flow, we may have the opportunity to return additional capital to shareholders, which would be accretive to adjusted EPS for the foreseeable future. All this results in a very compelling financial outlook.
In summary, we're committed to executing on our financial goals by leveraging our unique depth of capabilities to accelerate revenue and earnings growth through our continued commitment to operational excellence and our strategic and effective capital deployment strategy. We're creating shareholder value in both the near and long term. Now I'll hand it over to Greg Herrema, who'll be talking to you about accelerating innovation and growth in analytical instruments.
Thank you very much for the introduction, Pete, and thanks to all of you for joining us here at our analyst meeting. As Pete indicated, I'm responsible for the analytical instruments business in the company, and I really appreciate an opportunity today to provide an update with you on the progress we are making towards accelerating innovation and growth. While I'm really glad to be here today, I have to share with you that I'm particularly excited about what happened last week, and maybe even more importantly, what's going to happen two weeks from now. Last week, of course, we completed the Dionex acquisition, and I had a chance to participate in our day one activities at our liquid chromatography business site in Germering, Germany. I have to tell you, it was an absolutely terrific day, and I'll share more about the Dionex acquisition a little bit later this morning.
Two weeks from now, of course, is ASMS 2011, and I'm going to preview for you today the exciting new instruments that we'll be introducing at that conference. I want to make it very clear right here at the start of my presentation that ASMS 2011 will by far, beyond a shadow of a doubt, be our best ASMS ever. Marc gave you a prelude to that, and I'll back it up with more specific information a little bit later in my presentation. Let me provide just a brief overview of the analytical instruments business, which did just under $2.4 billion in revenues during the last four quarters. Our focus remains the same as I shared with you before: driving innovation to deliver leading analytical performance in the lab, at the line, and in the field, allowing us to solve the toughest analytical challenges.
Scientific instruments, our instruments for the lab, are the largest business at just over 60% of total revenues. Environmental and process instruments, our instruments primarily for the line, account for about 25% of the business, and handheld instruments, our fastest growing business, now represent over 10% of total revenues. Unlike the broader company, we sell virtually no consumables in the business I'm responsible for, with instruments representing just over 70% of revenues and services just under 30%. I really do believe that we are positioned to win in analytical instruments. Before I tell you why, though, let me comment on the competitive landscape. First, the companies you see here are the usual suspects for our lab instruments business. No surprises here, although many now are following us to the line and into the field.
There are also a number of other companies, mostly smaller, that compete directly with our environmental process and handheld instruments businesses, but none with the capabilities that we are capable to bring to bear. Why are we positioned to win? First, we are the clear technology leader in the lab, at the line, and in the field, and our R&D pipeline has never been stronger. Second, we have leading market positions in many of our core product lines, including chromatography now, given new capabilities from the Dionex acquisition. Third, we complement our leading instruments with deep applications expertise and the most comprehensive services offering in this industry. Finally, we truly leverage the commercial reach and consumables capability of the overall company to better serve our customers. In summary, there is no other analytical instrument business positioned to win as well as Thermo Fisher Scientific.
Let's now turn to an external view of the business. Fortunately, we serve attractive markets with exciting growth opportunities. Our total addressable market is about $16 billion, and we believe it is growing about 6%- 7% per year. The handheld market is growing the fastest, a trend we recognized and capitalized on years ago, and our business has grown by over $200 million during the last five years. The environmental and process instruments markets will grow more steadily, about 4%- 5% per year, once we move beyond the economic recovery and the higher growth rates that we are experiencing now. What excites us the most about these markets is our ability to outgrow the market by capturing leading share in new regulations and helping customers significantly improve their productivity.
Scientific instruments, the largest market at about $10 billion, is growing 6 %- 7%, driven by new regulations, the need for better drugs, emerging markets, and new applications for mass spectrometry. As I mentioned earlier, I believe we are well positioned to win and will capitalize on these key growth drivers to outpace the projected market growth. Let me provide a little more color on our handheld instruments business, an incredibly exciting business where our focus is on migrating lab quality analysis into the field. The market is over $1 billion in size and growing close to 10% per year, with mature technologies growing mid-single digits and new technologies growing double digits. In the examples that I've shown here, elemental analysis, molecular analysis, and radiation measurement, we are the market leader.
In elemental analysis, a business that has tripled in size since we acquired it in 2005, we serve a wide array of applications, have the highest performance instruments, and a very competitive cost position given our manufacturing presence in China. In molecular analysis, new applications like raw material identification in pharma manufacturing are emerging the fastest. We are the performance leader in all technologies, enabled by proprietary MEMS technology and the only company that can leverage FCIR, Brahmin, and NIR capabilities in the lab and in the field. In radiation measurement, our RadEye series of handheld instruments sets the performance standard in the industry, as well as also for form factor and breadth of products. Not surprisingly, our instruments were used extensively to help safeguard workers in the aftermath of the Japan nuclear crisis.
When you look across the handheld segment, we really have no peer, and we are the definitive market leader. Let me shift now to the line, where I'd like to provide an update on the exciting prospects for our air quality business. The global air quality market is greater than $600 million, growing about 5% per year. We are the global leader in ambient air monitoring, the global leader in dilution continuous emissions monitoring systems, and are just now entering the straight extracted continuous emissions monitoring market. Unlike any of our peers, we are a leader in both gas analysis and particulate monitoring. What excites us the most about this industry, for this market, is the future growth potential created by new regulations. The new regulations shown here on this page represent about $600 million worth of opportunity over the next five years.
Now, we recognize that the timing associated with these new regulations is uncertain, but what we do know with certainty is that we will capture a maximum share of any new regulations. Why are we so confident? The original U.S. Clean Air Mercury Rule in 2005 is a good example. We captured over 80% share, generating $75 million in incremental high margin business because we were one of only two companies globally that could solve the complex analytical challenge. We are confident that we will capture a leading share in all of these new regulations, given our technology, highly differentiated performance, complete monitoring solutions, and the local integration and manufacturing capability that we have established in high-growth countries like China and India. We don't talk much about our process instruments business, but we have great technology and products that consistently help our customers achieve greater productivity.
Our Thermo Scientific Prima Pro Process Mass Spec, an award-winning instrument launched last year, is a perfect example. As shown here by the image at the top left, a typical ethylene plant may require as many as 15 process GCs to monitor gas at different points in the process. We have demonstrated the ability to replace all of those process GCs with one to two process mass specs. How do we do it? Just like in the lab, a process mass spec instrument has significantly better performance than a process GC instrument. With 15 times faster speed and five times higher precision, a process mass spec has the horsepower required to simultaneously monitor data coming from multiple different channels. The customer value proposition, as you can imagine, is significant.
We reduce the cost of ownership by as much as 75% and help maximize yields by allowing the process to run more closely to its optimal parameters. Given the significant productivity advantages, we are gaining share from process GC in many markets like petrochem and steel manufacturing. Let me turn now to the lab and to elemental analysis, another product area that we have not really discussed much in the past. Elemental analysis is another billion-dollar market, and we have by far the most complete portfolio of any analytical instruments company. The largest application for trace elemental analysis is environmental testing of soil and water. Here, we have leading instrument performance and the lowest operating costs, critical to driving productivity for these routine high-volume testing labs. High-resolution instruments are required for the analysis of advanced materials and precious metals.
Here, we have the highest sensitivity and resolution of any instruments in the market. Bulk elemental analyzers are used for at-line and in-line QA and QC monitoring in industries like steel and cement that were hit hard by the recession but are recovering nicely now. Here, we have leading analytical performance and productivity-enabling automation platforms designed to simplify sample handling and analysis. In addition to the elemental analysis capabilities I've summarized here, we are also the world leader in isotope ratio mass spectrometers for geology, authenticity, and nuclear fuel applications. Including our handheld instruments business, we truly are the elemental analysis leader in the lab, at the line, and in the field. Moving now to life science mass spec, I would like to take a moment and share with you the profound impact that the Orbitrap instrument platform has had on the mass spec market.
We introduced the Orbitrap in 2005 with focus on the high-end research market. In less than two years, the instrument replaced almost the entire $100 million FT market, making high-resolution and accurate mass accessible to a broader population of researchers. We followed up that instrument with the introduction of the Exactive instrument in 2008, a benchtop Orbitrap instrument that is ideally suited for non-targeted screening applications like sports doping and pesticide analysis. Given the ability to simultaneously identify and quantify in one experiment, the instrument enables the lowest cost per sample for routine screening applications. The Exactive today is our fastest growing instrument and is taking share from the $700 million triple quad market. Now, at ASMS 2011, we.
be introducing the Q Orbitrap, an incredibly exciting new instrument that will allow us to absolutely take share in the QTop market. This incredible new instrument has an unmatched performance profile, will redefine the qualitative and quantitative workflow, and is priced to win. Given the ever-expanding application base for the Orbitrap platform, we are confident that we are gaining share in the $2 billion mass spectrometry market and strengthening our industry-leading position. Let's now turn to a preview of the mass spec instruments that we will introduce at ASMS in two weeks. As just mentioned, we will be introducing a Q Orbitrap instrument that I am confident will be the buzz of the show. We call it the Quantformation instrument, given the ability to definitively identify, quantify, and confirm in one experiment in a broad range of applications.
We will also introduce a new linear ion trap, the fastest and most sensitive ion trap on the market, and an ideal front end for our Orbitrap instruments. Last but certainly not least, we'll introduce a new high-field Orbitrap instrument, a quantum leap in performance from our current Orbitrap offering and the most significant advance for high-end proteomics research since we introduced the original Orbitrap back in 2005. To give you a feel for the increase in performance, our new high-field Orbitrap will have four times the resolution and scan speed of the current Orbitrap Balos, which already far outperforms the closest QTop instrument. We are also introducing new software packages with every one of these instruments, including our triple-plied product line, in order to help our customers benefit from the full processing power of all of these instruments. As I indicated before, 2011 will be our best ASMS ever.
I hope you can visit us at the conference and see firsthand the power of these new instruments, all of which also will be shipping at ASMS. Let me turn now to the Dionex acquisition, the perfect strategic fit for our scientific instruments business, especially our industry-leading mass spectrometry product line. Dionex has a great market profile, serving attractive markets like life sciences, environmental analysis, and food safety, with 35% of revenues coming from the high-growth Asia-Pacific region. Dionex, like us, is known for its innovative and high-performance products, all of which are highly complementary to our existing product lines. In instruments, we are strong in GCMS and LCMS, and Dionex is strong in IC and LC. In software, we are the leader in laboratory information management systems, and Dionex is the gold standard in chromatography data systems.
In consumables, we complement our GC and LC columns, vials, and solvents with Dionex IC and LC columns and consumables. On top of all this, we significantly expand our commercial reach into high-growth applied markets and routine testing laboratories, enabling significant cross-selling opportunities for our broader scientific instruments portfolio. In summary, you simply can't script a better strategic fit. I would like to take a moment now and show you what the Dionex acquisition means for our total chromatography business. As you can see, we have created a new $650 million chromatography powerhouse with industry-leading capabilities to better serve our customers. We now have a $325 million IC, LC, and GC instrument business with highly differentiated sample prep capabilities like LC multiplexing and automated solvent extraction. We now have a $175 million consumables business with a broad offering of columns, vials, septors, fittings, and solvents.
We now have a $150 million software and services business with a gold standard chromatography data system and the most comprehensive services offering in the market. We back the entire business with highly skilled applications engineers and applications and demo centers all over the world. As you know, we have been a leader in mass spectrometry for years. Now, for the first time ever, we are a leader in both chromatography and mass spec. As you can tell, these are incredibly exciting times for our analytical instruments business, and I am confident that we will accelerate innovation and growth in the future. We are positioned to win in attractive growth markets, have leading analytical performance in the lab, at the line, and in the field, and an incredible track record of innovation with a robust R&D pipeline.
In addition, we are advancing our industry leadership with strategic acquisitions like Aurora Scientific and Dionex. Coupled with the capabilities of our overall company, nobody can match what we can do for our customers in analytical instruments. Thank you for listening. I would like now to introduce Ken Berger, the President of our Specialty Diagnostics business, who will share with you how we are expanding our leading capabilities in the specialty diagnostics market. Thank you.
Thank you, Greg.
Good morning. Thank you. As mentioned, I'm responsible for the Specialty Diagnostics business. Last year, I picked up responsibility for this business shortly before this meeting. At this meeting, I called the business a hidden jewel within Thermo Fisher Scientific. Today it might no longer be a hidden jewel, but it's certainly a growing jewel for the company. Just last Thursday, we announced the acquisition of Phadia, a global leader in allergy and autoimmunity diagnostics. In this presentation, I'll give an overview of Specialty Diagnostics, our core capabilities with some key statistics. I will speak about target markets, why we are focused on them, and our competitive position. Most importantly, I will cover our innovation and how it is helping us drive sales globally with several examples.
I will conclude with an update on M&A, including the performance of our B·R·A·H·M·S acquisition one year later, our biomarker strategy, as well as additional insight on the Phadia acquisition and why we think it is a perfect fit in Specialty Diagnostics. Hopefully, I'll be able to convey why we are so bullish on this business and its future. Specialty Diagnostics is a $1.4 billion business with leadership positions in three attractive segments in the IBD market. As a reminder, we do not play, nor do we want to play, in more commodity-like segments. We are highly focused on segments where we can build leadership positions. In each of the business segments shown on this chart, specialty assays, anatomical pathology, and microbiology, we have been able to establish ourselves as leaders, create high competitive barriers to entry, and continuously bring innovative products to market, products that drive growth and productivity.
Underlying this success, but not shown on the chart, has been our intense market and customer focus, coupled with the discipline and processes to achieve world-class execution. Our Anatomical Pathology business is a leader in providing a full range of equipment, consumables, and services for workflow solutions in tissue-based cancer diagnostics. Our Microbiology business is a leading provider of products and technologies to help detect and identify pathogens and infectious diseases. Our largest business, Specialty Assays, is most notable for its leadership position in drugs of abuse testing and unique biomarkers. This business includes the B·R·A·H·M·S acquisition that we bought a little bit over a year ago. All three segments generate a continuous stream of high-margin consumables. We are very well positioned to win in our target markets against the competition. Let me cite just a few reasons why.
First, as mentioned, we are incredibly focused on segments and applications where we can truly differentiate ourselves. We have a long history of bringing innovative products to market, products that address real customer needs and make a difference. I'll give several examples later in this presentation. I am proud to say that nobody beats us when it comes to special assay development and manufacturing. We are the leader in assay technology and application expertise. Frankly, we are able to develop the most sensitive and specific assays available more efficiently than anyone else. In fact, as you might know, we are also the behind-the-scenes, highly trusted product development and manufacturing partner for several large IVD players. Our name is recognized around the world by customers for quality, service, and assurance of supply.
Our comprehensive product portfolio, coupled with our deep knowledge of end-use requirements, enables us to develop workflow solutions like no other company. Last but certainly not least, we are well positioned to win because of our ability to utilize and benefit from the leading healthcare channels and the Asia-Pacific commercial presence of Thermo Fisher Scientific, a truly compelling advantage. Specialty diagnostics targets attractive markets. There are a number of positive trends that favorably impact our business, of which I will highlight just a few. In anatomical pathology, laboratories are challenged by the tremendous growing volume of cancer diagnostic testing. In microbiology, there is a critical need to reduce hospital-required infections, as well as a growing concern to improve the quality and safety of our food supply. The ever-increasing need for faster, more accurate, and more sensitive assays drives the growth in our specialty assays business.
The good news is that while we have built a leadership position in each of these segments, there is still plenty of room to grow. In each segment, there is ample opportunity to expand geographically, adjacent applications and markets to penetrate, and plenty of opportunities to introduce new innovative products. We intend on consistently growing faster than our served markets, and we will continue to expand in attractive, high-margin specialty diagnostic segments using innovation as a key enabler. In anatomical pathology, I have a number of innovation examples I can choose from, but I would like to focus on how we bring continuous innovation to cancer diagnostics labs worldwide in the area of workflows. Today, for example, if you walked into a lab doing tissue-based cancer diagnostics, you would see literally hundreds, if not thousands, of patient samples.
The lab director will tell you sample volumes are increasing and trained technicians are scarce. Mistakes, as you can well imagine, can be catastrophic and are completely unacceptable. Hence, the incredible importance of accurate, foolproof sample tracking. Here, Thermo Fisher is the clear leader. Our industry-leading on-demand slide and cassette printers enable positive sample identification and security throughout the entire process workflow. We have incorporated barcodes to enhance information tracking, and now our new Secure Set product line provides one-step specimen placement for greater sample stability at lower associated labor costs. We are not stopping there. We have a unique patented technology that enables us to extend next-generation label and tracking technology to vials and other curved surfaces, a true door opener to more applications and new markets. Another innovation example would be in our specialty assays business.
In drugs of abuse testing, as I've mentioned, we are the clear leader. We have the broadest product menu, the most sensitive and specific technology available, and a longstanding distinguished track record of bringing new innovative products to market. Our most recent innovation is our just-introduced FDA-approved drugs of abuse oral assays. This development meets an important market need. Taking an oral swab is less invasive than blood or urine sampling. It is easier to administer and much less prone to adulteration. Other companies have announced oral drugs of abuse tests, but we are the only company who has been able to develop an oral assay for amphetamines and cannabinoids, marijuana. These are the most difficult drugs to develop assays for and the ones with the greatest market demand. In this case, we have the unique expertise and capability to develop a product with the sensitivity, specificity, and reliability required.
I now would like to provide an update on our B·R·A·H·M·S acquisition and our biomarker strategy. This is an excellent example of how we can strengthen our specialty diagnostics business through smart M&A. Last year at this meeting, I spoke about the B·R·A·H·M·S acquisition and said after six months, we were exceeding expectations with about 18% organic growth after owning the company for only six months. For the full year, we grew over 20% at very attractive margins. The outlook remains very positive as PCT has solidified its position as the gold standard for sepsis testing worldwide. Global opportunities for PCT are growing even faster than anticipated, and with our global commercial team, we are well positioned to drive additional demand and see substantial business in developing markets. Realizing the full potential of PCT is core to our biomarker strategy.
Today, PCT is primarily used to determine if a blood infection is viral or bacterial. We think this is just the beginning. There are other, perhaps even more significant add-on applications for PCT, including therapeutic drug monitoring. It is not just PCT. We have an exciting pipeline of biomarkers, including two new promising cardiac biomarkers, CoQ10 and ADM. CoQ10 is used to help doctors accurately diagnose acute myocardial infarction or heart attacks. ADM biomarker assays give physicians a powerful tool to determine patient risk stratification, an incredibly important task when they're evaluating for congestive heart failure. In addition, our biomarker strategy includes the continued placement, now over 900 worldwide, of our Cryptor instruments to drive additional demand.
All in all, I'm very pleased to say our acquisition of B·R·A·H·M·S was a resounding success, and we are very confident we will replicate the success on an even larger scale with our recent announcement on Phadia. I'd like to say a few words about Phadia. The Phadia acquisition is perfectly aligned with our strategy of extending our capabilities and establishing leadership in highly attractive diagnostic segments. Phadia, as you know, is the leading developer and manufacturer of innovative specialty IVD products for the highly attractive allergy and autoimmune markets. It is a fast-growing, high-margin business and will contribute nicely to specialty diagnostics and Thermo Fisher Scientific. With Phadia, specialty diagnostics will be just under $2 billion in revenue. I would like to note that the business under Thermo Fisher ownership will continue to be led by their management team under Phadia's existing COO, Jean Focione.
The chemistry between both organizations during the entire process has been exceptional. We are delighted to have such a talented, proven team join us, and likewise, the Phadia team is incredibly energized by the opportunities made possible by the scale and scope of Thermo Fisher Scientific. For example, already this week, Jean is in China, where they have very little business, meeting with Thermo Fisher Scientific's local leadership team. We want to hit the ground running, capturing synergies once the transaction closes. With our biomarker business, we also see opportunities to expand our test menu on Phadia's large installed base of instruments, numbering over 5,000 in 3,000 labs worldwide, as well as leverage their highly successful, unique clinical marketing model, which focuses on demand generation through the education of primary care physicians and pediatricians.
This is an incredibly powerful growth driver for the allergy and autoimmune diseases, which are highly complex diseases and often misunderstood. The Phadia team has built a formidable business. They are the undisputed leader and recognized standard setter in allergy diagnostics. The Immunocap product brand is globally recognized as the gold standard for in vitro allergy diagnostics. They are uniquely positioned in the industry with the broadest range of instruments and test formats to meet every customer need, from POC, point-of-care patient testing, to low-volume clinical labs, all the way up to the high-throughput reference labs. The autoimmune business is a leader in Europe for high-value autoimmune testing for such diseases as rheumatoid arthritis, celiac, and connective tissue disease. I should note, and this is important, the Elia autoimmune assays use the same common platform as the Immunocap in allergy.
This generates significant productivity and cost advantages for our customers and a compelling competitive advantage for us. Yet, and this is also exciting, while these two businesses are recognized leaders, both are in the very early stages of market penetration in both the U.S. and Asia-Pacific, regions where the allergy and autoimmune markets are developing very rapidly and where Thermo Fisher Scientific has a particularly strong presence. In summary, I'd like to leave you with several takeaways. Our specialty diagnostics business is a $1.4 billion, soon to be $2 billion high-margin business, serving very attractive markets. We are a disciplined and focused business with a longstanding reputation amongst customers worldwide for quality and service. We continue to build and strengthen our leadership position through innovation. As exemplified by the B·R·A·H·M·S acquisition, we are a smart buyer and a very good integrator.
Phadia is another example of how we will use M&A to strengthen our deep capabilities and leverage our leadership to improve diagnostics. I'd like to thank you for your attention and for your interest. At this point, I would like to introduce the break. We're going to take a break for 15 minutes. If we could join back here a few minutes before 10:45 A.M., that would be greatly appreciated. Thank you very much.
Okay, we're going to restart the program here. If everybody can take their seat. Thank you. I'm Alan Malus, and I'm responsible for our Biosciences business and our Laboratory Products business. This morning, I'll be talking to you about both. First, we're going to cover Biosciences. This is one of the three growth platforms in our Analytical Technologies segment. The second business I'll talk about is Laboratory Products.
This presentation will initiate our discussion about the Laboratory Products & Services segment. Even though my responsibilities straddle both business segments, you're going to hear some very common themes in my remarks today. Both Ken and Greg talked a great deal about innovation, the impact that that's having on differentiating Thermo Fisher in numerous end markets. Innovation is also important in our Biosciences and Laboratory Products businesses as well. Investing in innovation to improve our products, to improve and introduce new bioreagents, consumables, and equipment. In addition, providing the most comprehensive portfolio in our industry to our customers. What we can do with this is help our customers. We can help them improve their workflow, and we can provide them productivity improvements in a wide range of customer applications.
Our Biosciences business, we provide innovative technologies that drive greater productivity for the life science researcher in the labs and the bioproduction customers on the production floor. Biosciences consists of three distinct businesses. Our laboratory research business supports laboratory research customers who are performing very important work. They're analyzing disease states, and they're really making meaningful advances in the drug discovery process. Now, we're a leader in RNAi and gene modulation technologies that are critical tools in enabling our customers to understand proteins and how they react to potential drug treatments. In addition, we've developed a complete suite of products to service our customers with new solutions in PCR as well as qPCR-based testing. Now, turning to bioprocess production, we're leaders in single-use bioprocess containers, and we also offer media, sera, and an array of other products to support the entire bioprocess workflow.
Lastly, in chemicals, we have a complete portfolio of analytical and organic reagents to service any research laboratory. Now, our biosciences business is positioned well to grow, and let me tell you why. The combination of the investments that we've made to enhance our technology and our portfolio offering, along with the customer access that we enjoy from our global Thermo Fisher footprint, really position us with a tremendous opportunity to grow. At over $800 million, we're a meaningful participant in a $12 billion market. When you look at the life science research and bioprocess markets, the growth fundamentals are strong, and we anticipate that these markets will be growing at an annual rate of 5%- 6%. We have some unique technologies that really provide some very distinctive advantages to our customers in these markets.
We continue to invest to expand our technologies and our portfolio to better service the needs of the customers in these markets. Let me give you a few examples of some areas of innovation for us. First, let's take a look at bioprocess production. The transition to large molecule drugs, the emergence of biosimilars, and the growth of the global vaccine market really provide tremendous growth opportunities for the technologies that we offer. This is a market in which customer requirements are extremely stringent. The absolute worst nightmare for a customer is contamination in the production process. I'm sure you've read about some of these stories in the paper over the last couple of years. In this scenario, the production process shuts down. Most often, the facility, the entire production facility will shut down for months at a time.
For the manufacturers, this means significant loss in revenue and earnings and share position in the marketplace. Eliminating the risk of contamination and preserving the integrity of their product as it flows through the bioprocess production process is an absolute necessity. We are a leader in addressing these contamination risk management issues for our bioprocess customers. We have a leadership position in bioprocess containers. We have world-class CGM manufacturing capabilities in both Europe and North America. Our containers have a proprietary surface technology that ensures that a customer's product is not contaminated as it flows through the production process. In fact, over a million of our bioprocess containers are used by our customers annually, which is really a reflection of the confidence that the customers have in the quality of our products.
We are using this leadership position in bioprocess containers to expand our portfolio across the bioprocess workflow and better support our customers. Turning to the life science research market, this is an increasingly attractive opportunity for Thermo Fisher as we expand our offering and access to this market. Our research customers are working to expand the analysis of disease states and biological processes. New research methods and tools are enabling our customers to analyze more and more target genes and proteins. In the process, these same customers, it's necessary for them to validate these same new targets with traditional techniques such as PCR and qPCR, gene modulation, and a slew of other techniques that they use. We are building on our strengths in this marketplace as a company. We are leaders in mass spectrometry and proteomic reagents and in RNAi used in gene modulation.
Through internal innovation and acquisitions, we have built on these strengths and expanded our capabilities in such areas as protein detection, enzymes, nucleic acid detection, and PCR and qPCR-based testing. This technology and portfolio expansion is enabling us to gain greater growth in this growing marketplace. Let me give you a very specific example of an exciting growth opportunity in this life science research market. Within the past year, we have built out a complete PCR and qPCR workflow of assays, enzymes, reagents, and instruments. In addition, we have substantially improved the performance for our customers. With a combination of internal investments and complementary acquisitions, what we now are providing customers through a combination of using our assays, reagents, and enzymes in a workflow, we're delivering improved accuracy and specificity up to 50 times above conventional methods. In addition, we're reducing the PCR cycle time by up to 50%.
What traditionally had taken 30 minutes is now taking 15 minutes for a customer. In addition, we're providing a very affordable personalized PCR and qPCR instrument for our customers that's more energy efficient and as well has faster cycle times than competitive products. The combination of all the elements of this portfolio really positions us well. We're tremendously excited about the growth opportunities that we can have with our PCR and qPCR portfolios. The bioprocess and life science research markets are significant growth opportunities, and we're going to continue to invest. We're going to invest in our internal innovation as well as complementary acquisitions to expand our capabilities. In addition, we'll continue to leverage the access that we have to the marketplace through our global Thermo Fisher footprint.
Let me turn to our laboratory products business, which is the first of our laboratory products and services segment businesses that we're going to be highlighting today. One of the first things I'd like to do is really reemphasize one of the comments that Marc had made earlier today. That is, at $1.9 billion in our core laboratory products business, we have no peers in our industry. We offer customers a depth of laboratory equipment and consumables that no other competitor can match. We have leadership positions and equipment in such areas as benchtop centrifugation, cold storage, CO2 incubators, and many other products that you'll see in a typical laboratory. In addition, our consumables portfolio includes a comprehensive range of products, including cell culture, liquid handling, and chromatography consumables, just to name a few. We operate with a very clear advantage over our competitors in the laboratory products space.
If you look at all the competitors that we've listed here, which are the top competitors for this business, and you added up all the specific business segments in these companies that directly compete with us, that total would be substantially smaller than the size of our laboratory products business. We hold leadership positions in numerous product lines of this business. We have the most comprehensive portfolio in the industry. We have very in-depth knowledge of a broad set of applications in which our products are used. We have manufacturing scale and broad customer access. This combination really provides us with a powerful competitive advantage and really is unmatched in the marketplace today. Now, the background on our business, this is a business, our laboratory products business is a business that we've formed over the years through many strategic acquisitions. We have a proven track record of operational excellence here.
We've successfully acquired and integrated the products, brands, and businesses of over 30 companies. We've bought, consolidated, and built an industry leadership position. We continue to generate cost synergies by reducing our manufacturing footprint. We've consolidated in our laboratory products business over 20 manufacturing sites over the years. In addition, we've established low-cost region manufacturing, principally in Mexico and China. We're also driving TPI and TPI Lean, which is our program for continuous improvement. As you heard from Pete earlier today, TPI is ingrained in our culture and presents an ongoing opportunity for us to drive continuous cost reductions into the future. Now, in the laboratory products business, there are numerous opportunities to grow our business. Let me give you an example of three here.
First, we have a substantial opportunity to innovate our products and really provide improved tools for our customers that can increase their productivity in their day-to-day work in the laboratory. Second, we have an expertise and depth in our portfolio that's really unmatched. We service literally thousands of customer applications with our products. Noted here on the slide are a few of the more exciting customer applications that we're servicing today. In all of these, we're providing our customers support all the way from sample preparation through sample analysis and ultimately through sample storage. Now, the other major opportunity with this business is in emerging markets. Syed Jafri will be talking to you about this in his presentation later. Helping our customers to increase their productivity is a key focus of our laboratory products team.
Our investment in product enhancements is designed to improve the overall performance, efficiency, and ease of use of our products. Let me give you a couple of examples. First, our benchtop centrifuges hold nearly twice as many tubes as the industry average in the same footprint. This drives productivity by increasing volumes of the samples that are processed by our customers and also saves space that's precious in every laboratory. In addition, benchtop centrifuges feature a proprietary carbon fiber rotor technology. This provides customers the capability to run these same products at much faster speeds than our competitors and reduce the cycle time of their processes. Another example of a proprietary technology for us is our clip tip technology. Our customers are using, in a year, over a billion pipette tips of ours every year.
What's critical for the customers is the productivity and security of attaching and releasing these tips. Our clip tip technology is a technology that literally, with a minimal force, you can click and place the attachment of the pipette and offer an easy tip release system. This is improving productivity in a very repetitive process that's used broadly in laboratories throughout the world. In terms of applications, I'd like to share one exciting application that really holds a lot of growth prospects for this part of our company. As I indicated before, our comprehensive portfolio services literally thousands of applications for our customers. Tissue engineering and regenerative medicine is really a great example. Regenerative medicine is an area in which our customers are really making some truly remarkable discoveries.
Cell and tissue culture research techniques are being used to develop new skin, muscle, cartilage, tissues in a laboratory outside of a human body. Just imagine the positive impact that this can have on individuals who have seriously damaged or diseased bones, cartilage, or organs. The depth of the capabilities of the products and the knowledge that we have about applications put us in a position to provide key products at every stage of the process of this application, from isolation of cells to preparation to cultivation, harvesting, and then ultimately storing and transporting the cells. Now, we're the only competitor in the industry that can offer this comprehensive portfolio and range to support our customers in what's truly an exciting breakthrough research application. In summary, we're really clearly the industry leader in the laboratory products business.
Our depth of portfolio, our depth of technologies, our applications, and knowledge is really unmatched in the industry. When you combine that with the offering that we have and our incredible reach to the market through our Customer Channels group, we are positioned well to win in this marketplace. Now, I'd like to turn it over and introduce Ed Pesicka, who will be describing the capabilities of our industry-leading Customer Channels business and the advantages that it offers Thermo Fisher Scientific throughout reaching our customers in the marketplace.
I want to start off. Thank you, Alan, and good morning, everyone. I'm Ed Pesicka, and I'm extremely excited to be here today to talk about two distinct businesses, businesses that I have an extreme level of passion for, those businesses being the customer channel and the biopharma services business. While these businesses aren't integrated businesses, they do support many of the same customers. Not only do they support many of the same customers, they enable us to work together to leverage the depth of these two businesses. In addition to that, they enable us to leverage the strong, deep customer relationships that these two businesses have. Ultimately, they enable us to partner with our customers to drive productivity and growth. Today in the presentation, I'm going to cover the business profile and why I believe these businesses are positioned to win.
In addition to that, I will talk about the growth drivers. Probably most importantly, I'm going to talk about examples, tangible examples of how our positioning to win has translated into driving productivity and growth in the marketplace. There are three takeaways from this presentation. The first one is these businesses provide unparalleled reach and access to our customers. Second, these businesses provide a unique customer experience because of things such as the logistics strength, as well as the tailored solutions we offer. Finally, the leading scale. Let me first start with the customer channels and talk about the profile. In the lower left-hand corner, you can see the customer channels have approximately $4.6 billion in revenue, of which about 77% of that comes from consumables, 22% from equipment, and about 1% from service.
The business is made up of three distinct businesses: the research servicing the research markets, healthcare servicing the healthcare market, and safety servicing the safety market. Let me first start with research. Research is focused around four major industries: the pharmaceutical industry, the biotech industry, academic and government, and industrial, selling products ranging from proteomics, genomics, to basic laboratory chemicals, and as well as the qCQA lab. Many of the products Alan just talked about are sold through the channel, providing a tremendous vehicle for growth for self-manufactured products, as well as a tremendous vehicle for growth for other external suppliers' products. Next, the healthcare area, about 19% of this $4.6 billion business, servicing the hospital, reference labs, as well as physician office laboratories, selling products ranging from basic consumables and equipment, flu test kits, to analytical and diagnostic equipment, instruments, and consumables.
Again, some of the products Ken talked about today flow through the channel and provide an opportunity to grow that business. Last, the safety business, focused on the life science, clean rooms, and industrial protection. Really, to simplify this business down, this business provides the products that protect the employees from the environment around them, as well as the environment from the employees. Some of the products Greg talked about this morning are sold through this channel. Ultimately, the depth and the breadth of this business provide an unparalleled customer experience as well as reach. I'll talk about that in a little more detail in the examples later on. Moving on, why I believe this business is positioned to win. First of all, starting with the competition in the lower left.
While there are other people that participate in this marketplace, not one of these competitors competes across all three businesses. You have Cardinal Healthcare in the healthcare arena. You have Grainger in the safety and VWR in research. In addition to that, we have regional players, primarily in Europe and in Asia. If you really take a look at Asia, they're not just regional players. It's an extremely fragmented market. Why do I believe we're positioned to win? I believe we're positioned to win, again, because of the reach and the access, this tremendous customer experience, and our scale. Starting with the first, our complete offering, we offer a complete offering of products and services, over 800,000 products. Product is then going to be bundled into applications such as cell culture to continue to sell to the customer. That's a broad reach that we have with our customer base.
A significant portion of services. While the previous slide showed revenue and services only being 1%, we offer a significant number of services that are actually bundled in with the products. Next, this unparalleled touch customer experience. We provide a significant differentiation in customer experience for our customers. To simplify this, if you think about it, the scientist does research. We want to make sure we can provide everything before, during, and after that research. All the ancillary laboratory product services, everything from doing the order entry for the scientist to receiving the product, to moving the product around the facilities, to doing autoclaving, creation of media, chemical tracking, and on and on. All those other services make the scientist's job more productive so they can spend more time doing their research. Next, what do the customer channels do?
We offer tailored solutions and tailored solutions for the distinct markets we serve. In the biotech, many small startup biotech companies, they're looking for aggregation. We help them through our Powered By program. Second point. Round.
Around government and academic, we have proprietary grant tracking software that enables the scientist or the purchasing agent to track spend against the grants that have been approved. Next, we take the industries we serve and we'll even subsegment those down. A niche industry like the food and wine segment may seem like a small industry, but we put together a catalog with all the products that are needed for that niche industry. That way, the scientist or the purchasing person has one place to go for that solution, and that would be this food and wine catalog. Lastly, around applications, we've been bundling the broad portfolio within the application around genomics in our recently released results program. Last, scale. We have incredible global commercial strength that enables us to scale up our business. These things enable us to provide growth for Thermo Fisher .
In addition to that, drive tremendous productivity for our customers. Moving on to the second business, biopharma services. First, let me start with an overview of the business profile of this business. The business is made up of roughly three different businesses. It's clinical trials. It includes bioservices as well as distribution services. This business is roughly $600 million in revenue. Again, similar to the customer channels, there are other competitors that do participate in the industry, but not one of these competes across all businesses that we provide. Why am I excited? Why is this business positioned to win? Again, focused around customer reach and access, focused around incredible unparalleled customer experience and scale. First, we enable clinical trials. We can do everything from a small individual job to a complete outsourcing of a customer's entire clinical trial process, including buying the facilities from the customer.
We have the leading scale with depots throughout the world to service the customer. The depth of the capability within our clinical trials as well as our whole biopharma services business. We can do clinical trials, including the packaging, the labeling, the manufacturing, the distribution, the purchasing of comparators. Anything that's needed within a clinical trial, we have the capability to do for our customers. Next, we have the ability to handle biological specimen and archiving and management, which isn't just the storage. We also do aliquoting of the products for the customer. And probably most importantly, the last point here, we have a track record and a proven track record of quality and service to our customers. Those are the main reasons why I believe this business is significantly positioned to win in the marketplace going forward.
Let me talk a little about the market and some of the growth drivers in the market. Within the research channel, healthcare channel, safety channel, and biopharma services, we believe the addressable market at the bottom of the page has roughly $30 billion, of which we do about $5.2 billion today. We believe the market's growing around 3%- 4%. Let me dive specifically into each one of these. First of all, the research channel. There's considerable consolidation in the biopharmaceutical industry today. You may step back from that and say, how does that end up being a growth driver? It's because the businesses, the customer channels, the biopharma services, and even for that matter, the whole company has the ability to provide differentiation to drive tremendous productivity for the customer and ultimately result in growth back for us. You have global expansion.
Healthcare, Marc talked about a little earlier this morning. You have increasing patient access to healthcare. Next, you have the safety channel, which is focused around manufacturing employment. If you recall, I talked about protecting the employees from the environment. The more manufacturers that are employees that are employed, the more opportunity to protect those employees from the environment. A continued theme here of globalization. Lastly, within the biopharma services business, you have continued outsourcing trend. You have large pharmaceutical companies looking to outsource their clinical trials. You have Asian expansion or global expansion within this business. In two slides, I'm going to cover examples around the biopharma consolidation. I'm going to cover examples about the outsourcing and an example around the Asian expansion. Before I do that, let me move on and talk a little bit about the unparalleled access and reach.
Again, just touching on that for these businesses. First, these businesses have a premier brand, 100+ years of experience in the brand. There's convenience, and I talk about this customer convenience. Every day, there are over 4,000 customer-facing resources out there touching customers, understanding what their needs are, understanding their wants, and providing solutions to them. We have this leading logistics network, a global logistics network both in the channel as well as in the biopharma services business. We have regional warehouses to make sure we can provide the specific needs within those regional areas. Lastly, the depth of services on clinical trial management as well as inventory management and material handling. These items continue to enable us to meet the productivity needs of our customers. Let me now step from that to some examples. The first example is actually a follow-up from last year.
Last year, during this presentation, I talked about a proposal we provided to a large pharmaceutical company on day one of their merger. The customer's challenge really was, as a result of this merger and consolidation, how do they develop significant savings and synergies? Our solution was we could leverage the channel. We can look at how do we aggregate the products, the services, leverage some of the things Alan talked about on the application side, and provide a unique solution to the customer. The update on that is after a year of this process, we have provided tremendous productivity to the customer. We provided incredible savings to the customer in the tens of millions of dollars. We provided significant benefit to Thermo Fisher Scientific. How? Because we've had revenue grow by over 20% with this customer. We had the ability to expand services to this customer.
Probably most importantly, I can stand up here and tell you it was good, but just last month, we received from this customer their Supplier of the Year award. They select one out of over 10,000 suppliers to choose as their Supplier of the Year, and they chose us as a Supplier of the Year as a result of this program we put in place. Now it's the opportunity to take this model and move it to other large multinational corporations that are looking for this type of solution. This proves that the reach and the access we have to the customer, this unique and unparalleled customer experience we provide, as well as our scale to be able to service the customer all over the world, can drive productivity to our customers as well as growth for Thermo Fisher Scientific. Let me move on to the next example.
This example is related to biopharma services. Recall, one of the market growth drivers is outsourcing or the demand for outsourcing. We are leading the market right now in clinical trials outsourcing. What was the customer challenge we had? The customer was looking to reduce their clinical trials cost. They stepped back and looked at it, and they determined that our solution was the best solution to outsource their clinical packaging, labeling, manufacturing, and distribution. They could leverage our core competency and our domain expertise around clinical trials. The customer actually sold their facilities to us, or we picked those facilities up. The benefit to the customer was, instead of having a fixed facility, they've now got a variable cost structure. The customer saw increased productivity because our core competency could drive more productivity, and they saw reduced cost. What was the benefit to us?
Because of the scale, we increased our revenue. We developed stronger, deeper partnerships with that customer at all levels. We have visibility into the pipeline and enable us to take products that we were actually doing clinical trials for that customer at other facilities of ours and move it into this facility to drive higher utilization and capacity utilization of those facilities while freeing up capacity at our other facilities. It is another example of our customer reach and access, this unparalleled customer experience, and our scale that has enabled us to drive productivity to the customer and ultimately growth for Thermo Fisher Scientific. Let me take a look at the last example. If you recall, during the growth factors, I talked about global expansion, a common theme in the research markets, safety markets, and biopharma services.
Specifically, I want to talk about China here and how we are bringing choice and convenience to the Chinese laboratory supply market. I list this as a customer challenge. If I think about it, it's really a challenge for all the customers in this region in China as well as the entire area. There is a tremendously fragmented supplier base. That fragmented supplier base has created significant inconsistent service levels to the customer. What has been our position? One, we have been an early entrant in the region. We have a first-mover advantage. Two, we have invested. We have invested in supply chain solutions. We've taken the knowledge we've had from everywhere else in the world, from supply chain and inventory management, and we're moving that into this region. Next, we're making it easy to do business with the customers.
We're making it easy to do business with the customers with our catalog and local language, with e-commerce, and with our new Lab Startup program. Let me explain what our new Lab Startup program is. Because within the customer channels, with the depth of knowledge, we have the ability to help our customers design a laboratory. We have to help them manage the construction of a laboratory. We have the ability to help them outfit the laboratory with the initial equipment and instrumentation they need. Because of our supply chain solution, we have the ability to provide them products on an ongoing basis. These labs have ranged from one to two-person laboratories to up to 500-person laboratories. In addition to that, because of those capabilities, we have the ability not just to service large customers, but also the small customers.
The results within China for these businesses, we've had significant strong revenue growth. We've had rapid growth of consumables, and we've been able to drive the China-for-China portfolio. As we talked earlier in the presentation, there's a significant increase in low-cost region products that are being manufactured, in this case, in China. Leveraging the channel to sell those products that we manufacture in China for the local market has been able to be capitalized by leveraging the channel strength within China. Last, we've set up over 250 customer labs, again, ranging from a laboratory with only one or two people to a laboratory with well over 500 people. The access and reach that we have with our customers as they move to these regions, combined with the unparalleled customer experience and our scale, enables us to continue to drive productivity and growth in the marketplace.
In summary, the customer channels, we continue to partner with our customers, making sure we're focused on how do we provide productivity for the customer, and in the same sense, how do we provide growth for Thermo Fisher Scientific. We do this again through our unparalleled customer reach and access. We do this with tailoring our service solutions for the customer to driving our supply chain and global logistics expertise, where we are really a powerhouse, and that's in scale. Scale both in the channel as well as scale within biopharma services to enable global clinical trial research. It gives me great pleasure to introduce Syed Jafri, who's going to take this theme even further around Asia and talk about how we're capitalizing on growth opportunities in the Asian markets. Syed?
Thank you, Ed, and good morning, everyone. My name is Syed Jafri, and I'm responsible for a small region, Asia-Pacific and South America. I have to deal with multiple time zones. A few years ago, I lived in China, and I tried very hard to learn the Mandarin language. My kids always made fun of me because they were always ahead of me. When I took my current role, I was told that as long as you can learn to say hello and thank you in 10 different languages, you'll be all right. That's kind of what I've been focusing on. Over the next few minutes, I will share with you how we are capitalizing on growth opportunities in emerging markets. I will be mostly focusing on China and India in the interest of time. Our business in Asia-Pacific continues to become a larger part of our overall global business.
The market opportunity in Asia-Pacific is very, very compelling. We are trying to figure out how do we best resource it in a way that we can have the best growth we can possibly drive in this region. Today, we have shown a tremendous amount of commitment to this region. We have our investment strategy, which is very much in line with the growth that we are experiencing in this area. We have the largest footprint in our industry in Asia-Pacific. So far, we have demonstrated that we continue to increase our scale and our depth of capabilities. As a result, today, 13% of our revenues are coming from our Asia-Pacific operations. We have a strong track record of growth. Moving forward through the investment that we are making in this area, we are confident that we will further accelerate our growth in this region.
Here is a high-level view of our footprint in the region. Basically, we have more than 3,800 employees on the ground who are supported by a vast infrastructure of 45 commercial and manufacturing operations. We took many decades to build this presence and this footprint. This footprint remains dynamic as we continue to further enhance our presence in this region. I wanted to share with you some of the key milestones that we have been able to achieve since we started to build our business in this region, starting about 40 years ago. It was in the early 1970s when we started to sell our air emissions monitoring instruments in China. During the 1980s, we invested in building commercial and sales offices in big cities such as Shanghai and Beijing. It was in the late 1990s that is when we built our first factory in China.
That was followed by our second factory and a demo center in 2005 in the area of Shanghai. Today, we have four factories in China. It was in 2009 when I took the lead for our company to move the headquarters of our environmental instruments division from the Boston area to the Shanghai area. We did that because we wanted to get close to the growing environmental markets in China. We wanted to make sure that we are there to meet our customers' local needs. There are a number of other areas where we have been investing, for example, India, Australia, and New Zealand, where we have been building our business mostly through some very, very attractive acquisitions. There are a few other milestones on this page that I will touch on as I go through my presentation.
The key point that I wanted to leave you with on the page is that we have a long-term commitment to this region. We will continue to invest aggressively to drive growth for our business in this area. I wanted to give you a brief snapshot of our track record. Over the last five years, we have been able to grow our business here on an annual basis at a rate of 17%. Today, our Asia-Pacific business as a percentage of our total company business has literally doubled over the last five years. This track record gives us a great deal of confidence that moving forward, we will further accelerate our presence and growth in the future in this area. I wanted to talk a little bit about one of the major market drivers that are helping drive growth in this area.
Our estimate of the total market size in this area is about $12 billion. This represents analytical instruments, consumables, and services. We anticipate this market to be growing at a rate of about 8%- 10% on an annual basis for the next five years. The economies of China and India that are major drivers are growing at a high rate, around 9% and 8% respectively through 2011. As the quality and quantity of intellectual capital in these countries continues to get better, we are seeing a number of large global organizations establishing their research and development centers in China and India. Also, a number of large pharmaceutical companies continue to outsource their pharmaceutical services areas into CROs in India and China. All that is developing more opportunities in new labs and life science research opportunities for us.
We also anticipate that there will be new regulations that will continue to develop in India and China. For example, the environmental standards are getting tougher. Unlike the past, when new regulations were passed and they were not enforced, what we're seeing is that there is a stricter enforcement of these regulations, especially in the areas of environment and food safety, for example. Food safety is a great example in the sense that this industry has been under very intense scrutiny because of the issues that we have all heard about over the last couple of years in terms of quality failures in China. We believe that in the future, food safety regulations will become more prevalent in these countries, not just for the export markets, but also for the internal consumption as the population there becomes wealthier and more health-conscious.
The other major driver, at least from our perspective in China, is the latest five-year plan that was introduced back in March in the beginning of this year. This plan has a number of areas that will impact many of our industries that we are focusing on. On the next page, I will share with you the key elements of the China five-year plan. Here are the key elements of the China five-year plan. Basically, China is going to focus heavily on science while they are driving economic growth in the country. I would also talk to you a little bit about how our capabilities are aligned with the China plan in ensuring that we are able to serve the key drivers that they are going to be working on as they make major investments in China over the next five years.
Basically, China is making a very clear statement, and that is that they want to be more than just a factory of the world. They want to innovate. They want to design and develop products in China. They want to manufacture products in China, not just for the export markets, but also for the internal consumption. If you look at our position as a leader in serving science, we believe that we are in a great position to help them in a number of these areas. For example, only last year, we opened our new technology center in China. It is very much focused on innovating in China, designing and developing products in China for the Chinese markets. With the footprint that we have in the area, we are very confident that we can serve the needs from the perspective of making products in China for the domestic consumption area.
Another area that is highlighted in this plan is energy. This sector will attract tremendous investments over the next five years. Basically, Chinese are investing in every form of energy. They are trying to figure out how do they reduce the emissions from fossil fuel burning. The fact is that with the largest reserves of coal in the world residing in China, for the next many years, 70% of energy consumption in China will still be based on fossil fuel burning. With our position as a world leader in serving the coal-fired power plants around the world, we believe that we are in a good position to help them with the emissions monitoring as they build more coal-fired power plants. The other area I want to highlight is infrastructure. They are planning to invest heavily in building highways, in oil and gas pipelines, and also expanding their mining operations.
All of these areas can be very well served through the industrial businesses that we have in our company. I want to reiterate a key element of our strategy in the region, and that is that we will continue to increase our scale and our depth of capabilities to drive and accelerate our growth in this area. We have been building on a world-class organization. We have been hiring the top local talent in areas like China and India and starting recruiting programs with the top universities in these countries to bring people at a high caliber in the early stages of their career. We are also focusing heavily on expanding our commercial presence in this area. Just last year alone, we added more than 240 commercial people in our organization so we can get close to our customers.
One other thing I want to highlight here is the second demo center that we opened in Beijing so we can support our customers in their application development efforts in the Beijing area. Our technology centers in China and Singapore are basically the key to our innovation strategy in those areas. Through these technology centers, we are developing products for the local markets. We are also ensuring that we are able to develop products that help us in competing with the local competition in what we call the middle markets. From an infrastructure perspective, we are certainly benefiting from the vast infrastructure and footprint that we have in the country. We will continue to expand this presence in the future as well.
I wanted to share with you a few examples of how we are implementing our company's mission of enabling our customers to make the world a healthier, cleaner, and safer place. A few minutes ago, Ed Pesicka talked about the growth opportunities we are experiencing in the new labs area in China. Shenhua is the largest energy company in China. They have the largest reserves of coal in the world as part of their assets. They approached us about two years ago, asking us to work with them in helping them design and develop new research labs where they want to do research in reducing emissions from fossil fuel burning. Basically, they were asking us to help them provide turnkey solutions in a research lab. We worked with them and won a $10 million project about a year ago.
This year, we were recognized by Shenhua with a Vendor of Choice Award for the services and the support that we provided to them in building those labs. The other example I wanted to share with you is from India, where we recently won a $3 million project. This was working with a World Bank that was working in close cooperation with the National AIDS Control Organization in India. Basically, we were providing them centrifuges for blood component separation. We have been working with the blood banking industry in India since 1996. It is this 15 years of experience that we had in managing and supporting more than 250 installations around the country that actually helped us in winning this business. Another example I wanted to share with you is the introduction of our proprietary PCT biomarker test in China. We did that last year.
As you know, this test is used for the diagnosis of sepsis in emergency rooms and hospitals. So far, we have seen steady adoption of this test. What we believe is that as the healthcare reforms continue to take place in China, we will see a rapid adoption of this test. We also believe that through these reforms, we will see a significant increase in the adoption of multiple types of diagnostics techniques in the Chinese healthcare market. You have heard me say a couple of times about our presence and our footprint in Asia-Pacific. I wanted to share with you one of the latest investments that we are in the process of making at this time.
Last year, we decided that we will start to manufacture a large number of plastic consumables in China so we can fulfill our Chinese customers' demands with great efficiency. At the beginning of this year, we started to build a new factory in Suzhou, China, that will be operational at the beginning of next year. This factory will give us a tremendous competitive advantage in being able to compete with a number of local competitors in the consumables market area. To wrap up, I wanted to leave you with the following key takeaways. Asia-Pacific continues to be a very, very attractive growth market for our company, and we are committed to this region. Today, we have the largest footprint in this industry in Asia-Pacific, and our long-term commitment is absolutely going to drive growth for us because we see incredible growth potential over the next few years in this area.
Through the investments we have made and through the world-class organization we have on the ground in Asia-Pacific, we believe that we will continue to maintain our position as a leader in these emerging markets. Let me thank you, and I would invite back Marc Casper on the stage to close the discussion and lead the Q&A session. Thank you.
Syed, thank you. Let me make a quick comment or two, and then we'll open up for Q&A. For the Q&A session, we'll have a roving microphone. As Ken said at the beginning, just please state your name and company affiliation. I think the team gave you a good sense of how we're positioned to achieve our short and long-term goals. We have an unmatched scale, a unique depth of capabilities, incredible customer reach, and premier brands that position the company incredibly well. We have a great financial track record. I think Pete highlighted, supported by our operating leaders, the great outlook that we have. We're clearly positioned well to capitalize on those attractive market trends that all of us highlighted this morning. Ultimately, we think Thermo Fisher is a company that has a great future and is also an attractive investment.
With that, I'd like to take questions that you might have.
Marc, it's [Pete Wilson] of Mizuho Securities. You mentioned that ASMS was going to be a good year for you. How does that stack up, do you think, versus the competition?
I think every year, given the market leadership position that we have, we're always excited about our prospects. I'm sure every company is. As you know, for the last decade, we've continued to build our share position in mass spectrometry. We think we'll have a spectacular conference here.
How fast is the mass spec business growing for you?
I would say for the industry, I would say it is a high single-digit growth type business, you know, from a market growth perspective.
Sure.
Hey, Marc, this is Jon Gerber from Macquarie. I guess my question for you is about 18 months now as CEO of the company. You guys did a phenomenal job today of expressing the bullishness that you have of the business. You go out and you meet with investors. What do you think is the most misunderstood aspect of the Thermo story? You put up that slide of your evaluation, at least on a P.E. metric relative to others. Maybe you could just describe what you feel is the most misunderstood aspect of the Thermo story.
I think one is, I thank everyone for the interest today. I mean, I do think we spend a lot of time communicating the company's prospects. I think that in the dialogue that we have with our investors, there's always a very linear focus on organic growth as the predominant focus for success. When we look at it, you know, we view our company has an incredibly consistent track record of organic growth and taking a number of actions to actually accelerate that organic growth over time. It's not our singular focus of success. It really is around driving consistent and strong EPS growth. That's what we focus. I think the better we have the alignment of understanding of what the company is focused on, I think ultimately you see the PE multiple move in a positive direction.
Sure, thank you.
Marc?
Yes.
[Anthony Arias] from Baird. Excuse me, over here.
OK, thanks.
A lot of talk today about the opportunities in Asia-Pacific. Over the last five years, you've been able to grow that life of the pie about 100 basis points a year. As you think about the long-term outlook, the next decade, that sort of thing, how does that increase as part of the pie? How does that kind of reshape the mix?
What we think is about 100 basis points a year is a good goal. Dionex, in a small way, moves us a little bit further down that path because while it's a small company compared to the company size, they have an incredible presence in the region. That will help. I think each year, it's about 100 basis points. If you look at the industry across every one of the participants, about 18%, 19% of revenue occurs in the industry in Asia-Pacific. We'll get to that industry representation. Ultimately, because of the compelling capabilities that Syed articulated, you know, we'll get to above industry penetration over time.
Doug Schenkel from Cowen. Marc, incorporated into your guidance for this year and next year is the assumption that the economy continues to improve gradually, I think is how you put it. Could you talk more specifically about what assumptions are factored into this guidance by end market, you know, academic research, biopharma, hospital, or industrial spend?
Yeah, so when we look at the business today, we're clearly seeing an improving economic situation industrially. That's happening clearly around the world. The assumption there is that that trend continues, that just based on some of our longer cycle businesses, we have some pretty good visibility to what our industrial customers think. They clearly are bullish about growth prospects. That continued improvement there seems logical. We're assuming for biopharma pretty consistent trends with what you see today. For academic and government, similar as well, that you have a constrained world of spending, but that there's still quite a bit of core research going on and that you'll have relatively good stability amongst academic and government customers around the world. Those two segments are pretty similar. I actually think that specialty diagnostics in our healthcare and diagnostics segment actually continuing trends. As employment picks up, that's actually a nice boost.
I think that two of our markets in improvement, two of our markets in stability is the way to think about it.
OK, and if I could sneak in one more, Pete in his prepared remarks about how the debt ratios were tracking, and I just want to make sure I got this right, you reminded us that the rating stayed unchanged post-Phadia, but then added that you guys intend to pay down debt with free cash flow. Were those two things related? Did you have to make a commitment to the rating agencies to pay down debt or not?
That didn't come out right. The 2.8% and the paying down the debt is not directly related, but I think we're comfortable more around the 2% range. Over time, that's kind of where you would expect us to be with it popping up for something like Phadia.
OK, no change in your ability to go into the 3% opportunistically for the right deal moving forward. Is that correct?
That's correct.
Thank you.
[Nandita Kaushal ] from Barclays Capital. Sure. Liquid chromatography is something of a well-entrenched duopoly. When you think about Thermo 's position with Dionex in the mix, could you talk about areas that you plan to focus on, competitive landscape, and then a little bit about the growth rate? Obviously, you need a more focused strategy in that area to be.
Sure. Dionex independently was doing a terrific job of gaining share in liquid chromatography. Effectively, Dionex has an incredible strength, our business now, in ion chromatography, where they have very, very strong market share. They leveraged that to selectively pick spots where they were getting nice growth in HPLC and taking share from other players. Yet they were still a small company. They now have access to a much bigger company, with much greater commercial reach. From that, in and of itself, will allow very significant opportunities in HPLC. There is technology sharing. Both companies have technologies that are complementary. We can leverage the incredible mass spec presence that we have around the world that will also help us drive more liquid chromatography sales. We think the combination, as I think Greg articulated nicely, is quite compelling in terms of our position in chromatography more broadly.
Thank you.
Go ahead, Ross.
Is this on? Oh, hey, Marc , Marshall here. It's from Morgan Stanley. First question was just on the margin guidance for the low 20s. You're obviously going to integrate a couple of higher margin businesses as well. If you could give us some sense of, one, kind of what low 20s means in terms of margin expansion on the core business, and then also in terms of analytical technologies and lab products margins, kind of how those relate to that low 20s target.
Sure. In terms of, we put the near-term goal. Normally, we would say we put a midterm goal for that. We put a near term because with two acquisitions that are of higher margin, that's going to move us further. Obviously, we didn't put Phadia in the guidance. That will also help get us to the near-term goal more quickly, which means our margins are going to expand rapidly over the next couple of years for the company, just based on our core competencies, which Alan and Pete and myself talked about, as well as the accretive nature of the M&A. Margin expansion, we'll get to the low 20s in the short term. I've said for a very long time, we still have opportunities beyond that. Every year, we have those methodologies. They drive productivity. They drive margin expansion. We don't stop at the low 20s.
Normally, people would have expected, I think, in this room that three to five years out, you're going to get to the low 20s. That's obviously going to get a little bit nearer in terms of when you get there. In terms of the segments, obviously, analytical technologies is a higher margin segment than our laboratory products & services. You're going to see more margin expansion in analytical technologies. You're going to see a little bit less margin expansion, but you'll see some expansion in time over there. The big difference is that we control more of the value chain in our analytical technologies business. Therefore, there's more opportunity to drive margin expansion. Part of Ed's business, we control really the front end of the value chain incredibly strongly. Therefore, you have a little bit less opportunity to expand margins, but incredible opportunity to create value for the company.
Right. Just one more follow-up, which was on the 2012 guidance. I don't think in the past, you guys haven't typically included the buyback assumption or 50% of free cash flow in the assumption. Two questions on that would be, one, just the thinking there. Why was this the time to kind of include that now in your base guidance? How much are you assuming of that 13%- 15% next year is coming from an incremental buyback? Thanks.
Pete answered the second part of the question about how to think about that. We've been so consistent on our capital deployment messaging for the last two years that I think everyone in this room would expect that roughly 50% is going to be on buybacks. That's why it's included. It's a matter of, you know, we're very much of a mentality in this company. We're clear on what we're trying to do and do it, and no surprises. That's why we included it. Pete, anything you want to talk about the specifics?
Yeah, just in terms of the specifics, it's about 3% or 4% accretion, assuming that.
Hey Marc, it's [Ross Mika ] from Deutsche. One of the key themes for today was the idea of value creation and the focus of the business there. You threw up a slide on the return on invested capital. It's obviously been a key investor focus. To the discussion before on the multiple, some would debate whether or not the ROIC is kind of linked to the multiple being below the peers. How do you think about the trend of ROIC over time in the context of the recent acquisitions that were done and overall for the business on a longer time frame? Obviously, we saw that it's above certainly where the business was post-Fisher. If you look at the cash-on-cash returns of some of the deals that you've done over the last few years on the metrics, you can only see because you understand how the business has trended.
How would you characterize your ability to create value over time using M&A as a tool and utilizing the business's real key competency on cash flow creation?
Right. You know, we put the update slide on return on invested capital because it's incredibly important to us as a metric. It's one that is a longer-term metric, but it's one that we're very focused on. When you look at it, first of all, the number starts at a low point because of the oddities of how we created the company from an accounting perspective, a smaller company acquiring through a merger a much bigger company. The absolute number starts at around 7%, which is a relatively low number. If we did the same transaction at the same premium and Fisher acquired Thermo Electron, you start out with a much higher starting point. What we really think is relevant is what are we doing with the metric from whatever the starting point was?
Are we doing a use of capital, internal projects and external, that actually is significantly above our cost of capital? Every time we spend a dollar, are we generating value? The answer is yes. We're incredibly disciplined on every capital project, on every acquisition that our internal rates of return minimum are better than 10%, often much, much higher than that. Where we spend our money, we're generating returns. You get a question of, OK, what's the time frame, which is the last aspect. On internal projects, you're typically getting returns above our cost of capital, which is about 8.5%, typically in a year or two. On larger M&A, little M&A, maybe two to three years, larger M&A, maybe three to five years, is when you're getting accretion to the capital that we're investing. It clearly is going to build.
We clearly are taking actions through the investments we're making that should create tremendous tailwinds. When we look at a particular deal, we're really not focused on whether we can get accretion in the super short term. It's not like the next quarter something has to be a pop because what we're trying to do is make sure that we continue to build our industry leadership and generate long-term sustainable returns for our shareholders.
Maybe one other quick thing. You know, on the 2012 guidance, I found it was interesting. In the last few years, you sort of talked about mid single-digit growth for the business, which would kind of imply 4%- 6%. This year, you were kind of more specific of around 5%, which is actually about 100 bps above what you had done the last two years. I mean, as we sort of think about that general trend between the R&D investments you've done, the M&A we just saw taking place, I mean, are we to think of Thermo from an organic growth basis maybe slightly more comfortably in that 5%- 6% range on a two to three-year basis, at least assuming the economy holds in, versus maybe the 4%-ish percent range we had been tracking at the last 12- 18 months?
I think that we are clearly taking a set of actions to continue to position the company for a better and better growth profile. That is very clear. I think Pete, using the little squiggly four versus the squiggly five, jumps out clearly that we think next year, based on those actions, is going to be a period of acceleration. Our longer-term view is mid-single digits is the right way to think about it. Obviously, there'll be periods when it's going to be on the higher end of that. There'll be periods, depending on what's going on in the economy, that might be on the lower end of it. We're getting returns on R&D. We're getting returns on Asia-Pacific. We're getting returns from our value proposition and smart M&A. That combination is clearly going to position the company to have improving growth prospects as we go forward.
Hi, it's [Ahmed Fala] from Citi. Marc, can you expand on your comments on the academic and government spending? You said it's a constrained world of spending in your assumptions. What are you seeing in Europe and in the U.S. from as early as yesterday, where the House Appropriations Committee is even proposing a 12% cut to the FDA? Are your assumptions that the U.S. spending environment is going to get worse or stay the same?
When we look at our two different things, if we look at the prospects, we're assuming relatively flattish budgets in aggregate for that segment, maybe a little bit of growth in certain parts of the world. Certainly, the U.S., based on the outlook for NIH, is going to be a flattish type world. That's how we're thinking about the 2012 outlook as we think about what the environment is. Hopefully, that's helpful.
Anything on Europe, though?
In terms of Europe, really nothing new to report since our earnings call of about a month ago.
OK. Just one quick follow-up. I think at last year's meeting, you did talk about your underlying growth assumptions for consumables, instruments, and service. Could you do that again for 2012?
We actually don't manage the business that way. We can't give you that viewpoint in terms of that. We really do manage the business as you saw how we manage it. We don't have somebody that manages consumables or so forth.
Sure.
Hi, thanks. Dan Arias from UBS. Marc, the expansion of the diagnostics business is pretty exciting. When you think of the evolution of that unit going forward and also the way in which technologies and markets are developing, how do, broadly speaking, molecular platforms and molecular assays figure into either your M&A strategy or your ongoing organic product development strategy?
You know, it's amazing how impressive Phadia's molecular capability is within the allergy world. We're excited about it because they have a full set of detection capabilities. They bring a really nice capability to have allergy testing done, including from a molecular perspective. That obviously is something that we're very enthusiastic about.
Marc, when you spoke about return on invested capital and your hurdle rates, you mentioned the reverse, sort of the reverse acquisition and kind of putting a fair amount of goodwill on your balance sheet. Do you think about these returns or your ROIC metrics, ex-goodwill, and in that case, when you're making acquisitions and you compare it to your core organic ROIC, does that match up the same way when you adjust for that goodwill issue?
No, when we make those investments and we're looking at that decision, we're looking at the total purchase price that we're putting forth and then not to differentiate where it goes on the balance sheet. It's the whole purchase price for the asset and then thinking about the returns that it's going to generate over time.
Hey Marc, Isaac Ro of Goldman Sachs, thanks. Just a question on Asia-Pacific. You talked about the long term. I certainly appreciate the opportunity there. In the near term, if you could maybe give us an update on how you're looking at China for the balance of the year. I think there's been some talk about a little bit of slowdown in the GDP outlook there. Maybe secondly on Japan, an update on where we stand there. Hopefully, Japan continues to make its way out of the challenges there in the next couple of quarters. An update on those two regions in particular for this year.
Isaac, not much has changed since late April when we did our earnings call and talked through the market. China, very strong performance is what we saw in Q1 and feel good about the outlook, active pipeline of activity. Japan, obviously a horrible situation, really immaterial in terms of the effect on us. As we look to the year, we don't see a material impact. We're paying a lot of attention. Our team there has done a really good job in terms of addressing the challenges that they're facing.
Hey, Marc, [Tucker Pearson], JP Morgan. You've got a lot here to transform the portfolio, obviously, this year with some bigger deals in the divestitures. Can you just talk to where we are in the process? In other words, borrowing costs are obviously going to be going up going forward. Did you see this as kind of a unique window to capitalize on some larger deals and then we get back to a more normalized tuck-in strategy? Or talk, I guess, to your thought process to the larger deals this year.
Yeah, so actually, the financing environment didn't play in at all into the decisions because we don't look at the financing environment to figure out whether it's generating a true return or not, right? Because we're looking at our cost of capital, which is the long-term cost of capital. We like these deals. We've had long-term dialogue with both Dionex and Phadia, and we were able to make them actionable today, which is fantastic. The financing cost wasn't a factor. It drives some more accretion, right, which is a positive. It's not a factor on why we did it or not. I think from a, that's the first part. That didn't affect it. From a normalized activity perspective, which is a totally different question, we're really focused on actually delivering on the commitments that we made on Dionex and when we have Phadia closed on delivering Phadia.
That's really where our intense focus is going to be.
Just to follow up, you talked to your ability to kind of manage multiple integrations. The comments before on the footprint, you had gone through prior to doing Fisher the big three active restructuring at Thermo. Why not undertake a kind of larger effort to reduce the footprint because you've added a lot of facilities with these deals?
Sure. In terms of the footprint consolidation aspects, they'll happen naturally as part of the deal. In a way, you keep refreshing that pipeline of opportunities. We have facilities that will close, and we'll continue to work that process. Some from previous deals, I'm sure new ones will happen as well. In terms of the ability to integrate the two transactions that we talked about today, I think the team, you see the depth of the management team. This is just a small part of it. We have a very, very strong team. Obviously, these two large transactions fall in two totally different parts of the business that have, Ken and Greg have great leadership teams that will do a fabulous job of putting these businesses as part of Thermo Fisher .
OK. Great. Marc, Paul Knight, CLSA. How are you?
Hi, Paul. Welcome.
How do you take into account negative synergy as you buy diagnostics firms? Do you view that there's a risk rising as you do this? You lose customers on the other parts of the business?
In terms of our relationship with some of the companies?
Yeah.
No, actually, we're pretty thoughtful about what businesses that are in the portfolio. We have incredible relationships with the large OEM players. We don't compete with them. We have great relationships with the Abbotts, the Roche, the Siemens, the Beckman Coulters of the world, and see that as a part of our strategy that is unaffected by the move that we just made.
By how much will you increase headcount in Asia this year?
I don't actually have a specific number. Probably last year was a good proxy for what you'd expect. A couple hundred more people commercially is probably a good assumption.
OK. Lastly, on spectroscopy, is that market shrinking or not for the handheld products that you have?
The market is clearly growing. I mean, right now, the spectroscopy instruments, both in handheld as well as in the lab, are very tied to industrial applications, which is the fastest growing part of the company. Clearly, they're doing quite well.
I'm trying to better understand your, unique customer value proposition, because it seems to be a pretty key growth driver. The two things I've seen in your presentation talked about innovation and also lab productivity enhancement, which to me means a lot of Chinese implementation as you move to a high-cost center to a lower-cost center. I'm trying to understand from you really how you think about the lasting customer value proposition if it's just not the one-time-off China switch and how the company thinks about how they share the value enhancement, I don't know, 30%, 40% with the customer?
Yeah, thank you for the last question. In terms of what we're trying to do from a value proposition, it's really about our scale and our depth of capabilities. When you think about customer productivity, it's not about what our productivity is, which we're world-class at. It's actually about helping the customers be more efficient. It's really nothing to do with us moving to China. It's actually about helping them take significant costs out of their system of how they utilize these types of products. That's where we have a great track record. Thank you. Given the time, let me just wrap up with a couple of closing thoughts. One, thank you for your interest. Thank you for attending today. I would like to thank the management team, the presenters, as well as the extended company leadership team that's here with us today.
I'd also like to thank our entire board of directors who participated in the meeting today as well. Thanks again. I look forward with the management team to keep you updated on our progress. Have a good afternoon, everybody.