Good morning. I'm Rafael, Vice President of Investor Relations for Thermo Fisher Scientific, and I want to welcome you to our 2021 Investor Day. So let me start by briefly covering the agenda. Mark Casper, our Chairman, President and CEO, who will start off with a strategic view of how we consistently create value for all our stakeholders. Mark Stephenson, Executive Vice President and Chief Operating Officer and Michel Lagarde, Executive Vice President, will discuss our proven growth strategy in action.
Stephen Williamson, our CFO, will discuss our excellent financial results, including our financial outlook for the future. After the formal presentations conclude, we will take a 5 minute break and then open it up for Q and A. We expect to wrap up around 10:45 am. So before we begin the presentations, let me cover our safe harbor. Various remarks that we may make in these presentations about the company's future expectations, plans and prospects constitute forward looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the company's most recent annual and quarterly reports under the caption Risk Factors, which are on file with the Securities and Exchange Commission and available in the Investors section of our website under the heading SEC filings. While we may elect to update forward looking statements at some point in the future, we may 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 margin and free cash flow. The non GAAP financial measures of our results of operations and cash flows included in today's presentations are not meant to be considered superior to or a substitute for Thermo Fisher's results of operations prepared in accordance with GAAP.
Definitions of these non GAAP financials measures and for historical purposes, a reconciliation of the non GAAP financial measures to the most directly comparable GAAP measures is available in the appendix of today's presentations. So With that, it's my pleasure to turn the program over to Mark. Thanks, Raf. It is Great to be here with you this morning. Good morning, everyone, and thanks for joining our 2021 Investor Day.
I know that you're going
to come away from this meeting with a great understanding of why we're so excited for the future. I want to start by thanking our teams around the world for consistently delivering for Thermo Fisher Scientific, our customers and society overall. As always, I'd like to thank our Board of Directors for their ongoing support and confidence in our team. I know you're going to get a sense this morning of how excited I am for what's ahead for our company and the impact we're having on our customers and society. So the key takeaways of the day, when you look at the company, we are incredibly well positioned industry leader and we serve very attractive end markets.
We have a proven growth strategy that's powered by our PPI business system. As you know, we're leading the industry in the COVID-nineteen response. And at the same time, we're enhancing our competitive position. We have an outstanding financial track record and outlook with long term high single digit organic revenue growth. And our comprehensive ESG strategy ensures that we create sustainable value for all of our stakeholders.
My presentation this morning is going to have 2 parts. First, I'm going to orient you to the company, give you a quick set of highlights, And then I'm going to talk about why we're so incredibly excited about the terrific future we have and how well positioned we are. So Everything, of course, starts with our mission. Our mission is our purpose. We enable our customers to make the world healthier, cleaner and safer.
And that inspires all 90,000 of us to bring our very best every single day. When you look at Thermo Fisher Scientific today, $35,000,000,000 in revenue, 90,000 awesome colleagues. We invest $1,400,000,000 in R and D every year. Our customers know us for our leading brands, our industry leading scale and our unmatched depth of capabilities of which you'll get a good sense of today. And all of this is powered by our practical process improvement or PPI business system.
We have 4 complementary segments. Each of them are leaders in their own rights. They add value to one another. And when you look at it from a customer lens, It's just an awesome set of breadth and depth of capabilities to support the important work that our customers do. As a company, we're consistently creating value for all of our stakeholders, our shareholders, through our outstanding financial track record and outlook for value creation.
For our customers, We help our customers accelerate their innovation and enhance their productivity, ultimately making it rational for them to want to do more business with us, which enables us to continually gain market share. From a colleague perspective, Thermo Fisher Scientific is a great place to have a mission driven career. And then finally, from a community perspective, We enhance our local communities and we improve the world for current and future generations. And by doing that, It creates a sustainable model of value creation for all of our stakeholders. All of this is powered by our PPI business system and our mission driven culture.
When you look at our financial track record, it's truly outstanding. Over the last 10 years, we've averaged 12% growth in revenue. That 12% growth has been translated into 19% CAGR for adjusted EPS and for free cash flow. Really an incredible performance that sets us up for a bright future. Last year, we spent a significant portion of our time at the analyst meeting talking about our role in the COVID-nineteen response.
And this year, while no one slide Can do it justice, given the scale of the role that we've had. What I wanted to do is get to the essence of how we've thought about the COVID response. We made this happen as a team. We mobilized with speed at scale. We've enabled from a PCR testing perspective over 650,000,000 PCR tests to date.
You may have remembered a year ago, we talked about supporting 300 different vaccine and therapy projects to respond to COVID. Not only did we do that, but we transitioned today to supporting the most prominent vaccine and therapies that are being used to fight the pandemic. In the process, we've generated almost $14,000,000,000 in revenue over this 2 year period. And while doing all of that, we've been able to accelerate our growth strategy, strengthening our customer relationships, accelerating investments in commercial capabilities, R and D, new capabilities, as well as capacity expansion. We're expanding our offerings further with the pending PPD acquisition.
And then finally, we've been able to make meaningful investments in our colleagues and our communities to allow us during this period to deliver exceptional benefits to all of our stakeholders. Now looking to the future, We are exceptionally positioned for a terrific future. I'm going to cover 4 main points in my presentation diving into each of them, starting with the fact that we are an industry leader serving very attractive end markets. Looking at the end markets, they have strong and durable market growth. In fact, demographics, the amazing advances going on in life sciences research right now, the strong funding environment in biotech and Our customers desire to partner more to accelerate their work creates an incredibly exciting time.
The pandemic has actually increased the investment outlook and what that translates into a large serve market, dollars 170,000,000,000 with 4% to 6% long term core market growth. The actions we've taken over the last 5 years has allowed us to strategically evolve our end market exposure. Over the period of time, we've roughly doubled the size of the company. We've grown the absolute position we've had in each of the end markets, while at the same point expanding our pharma and biotech position to representing more than half of our revenue, which is really exciting for the future. Turning to the second aspect of why we're so excited for how we're positioned for the future.
I want to go through our growth strategy and how that drives share gain. You're very familiar with the growth strategy. I'm going to give you some updates on it and it's consistent with years past. The strategy is a proven one. It's our commitment to high impact innovation, leveraging the scale in the high growth and emerging markets and benefiting from our unique customer value proposition.
That growth strategy in the strong markets we serve translates into 7% to 9% long term for organic revenue growth, a level that we're operating at today. We're very excited about our growth prospects. And let me tell you a little bit more why. Starting with innovation. We invest significantly, dollars 1,400,000,000 this year.
Amazing teams focused on our business with deep domain knowledge. We attract the best people in each of the fields because they're so passionate about the opportunities they have here to make a difference for our customers. Our colleagues benefit from the differentiated customer access we have and from the technological depth we have across the company. That combination of a large investment, great teams focused on our business and leveraging the company as a whole has allowed us to consistently deliver best in class products. In fact, we continually launch those high impact products that enables life sciences, diagnostics and Material Science in all some of the recent advances that we've launched.
The second aspect of our growth strategy is leveraging the scale we have in the high growth and emerging markets, dollars 7,100,000,000 of our revenue. Our key differentiators is our leading scale, our unique depth of our product and service offerings, our commercial reach, our e commerce capabilities, strong supply chain and our ability to localize R and D manufacturing. To bring it to life, let me give you an update about India. Because of the pandemic, we were able to localize the production of our COVID PCR test kits in India to accelerate the response of the country addressing the pandemic. It gives you a sense of both mobilizing with speed at scale and the ability to actually do this locally where it makes sense.
In terms of China, we are enabling the fast growing pharma and biotech market. We're doing that in a multifaceted way. China has established bioparks or biotech clusters and we are providing the life science research offerings to enable that research. As the projects move from research into the production, we've been able to support that activity with our new single use technology factory in Suzhou, which allows us to bring our bioprocessing solutions locally for drug development manufacturing. And a lot of clients want to benefit from our knowledge to actually do the manufacturing itself.
And we formed a joint venture with Interforce to establish a bioproduction facility within the country as well. Turning to the 3rd aspect of our growth strategy, why we're so well positioned for strong organic growth, It's how we leverage our unique customer value proposition for pharma and biotech. We enable our customers with our leading life sciences and pharma services offering. In terms of life sciences offering from research through bioproduction all the way to leveraging our expertise and capabilities in pharma services. We have a unique customer access, and we continually increase our share of wallet with existing customers by having relevant new offerings to help them be successful.
Product launches, the benefits of our channel, our pharma services capabilities and enhancing it through M and A. Let me give you a little bit more details and give you a sense of it. We are the trusted partner to the pharma and biotech industry, whether it's a small and emerging company or the largest of biopharma companies. It starts with customer insight that we've been able to develop over decades decades of working with these customers. We collaborate in the academic institutions, the health care institutions and with biotech and pharma to understand where the science is going.
We build trusted relationships with those companies And we bring together our differentiated offering of best in class products, portfolio depth, leveraging our pharma services capability and the deep the expertise we have to create a virtuous cycle to enable our customers to accelerate their innovation and enhance their productivity. The third aspect of why we're so excited for our future is our proven approach to capital deployment. Our capital deployment strategy, it remains unchanged. And Stephen is going to go through it in more detail. I'm going to focus on M and A, which will be 60% to 75% of our future capital deployment.
Looking at our M and A strategy, it's a very successful one. And it's based on the criteria that we use, which is we want to select the right deals, the deals that enhance our customer offering, strengthen our strategic position and ultimately create shareholder value. It's a very disciplined process on decision making, and we have a proven integration approach That translates into enhancing the financial and operational performance of the acquired companies, and that translates into excellent cost and revenue synergies and financial performance overall, creating significant value for our shareholders. A question I often get is what does the future hold? And we serve a large and very fragmented market with 100 of smaller companies and ample opportunities to continue this successful strategy.
When you look at our track record here, It's extremely impressive in terms of value creation. These are some of the larger transactions we've done over the last 11 years and we're excited how we've been able to improve the performance of each acquisition while benefiting our customers, our colleagues and the company overall. PPD is our next large transaction, and let me give you an update on that. The slides we presented at the time of the announcement of the transaction started with the rationale around creating customer shareholder value. PPD is a leading clinical research organization.
It's a natural extension of our value proposition for our customers. It's an acquisition of about $20,900,000,000 It's financially compelling and we expect to close the transaction by the end of the year. The strategic rationale, it establishes Thermo Fisher as a global leader in the attractive high growth clinical research services industry. It's a natural extension of our capabilities, creates meaningful benefit for our customers. It'll allow us to partner with our customers as they move from a scientific idea to an approved medicine.
It's a compelling combination with the opportunity over time to meaningfully reduce both the cost and time to bring innovative therapies to market. And we'll be able to generate substantial synergies and financial benefits to create shareholder value. Transaction is progressing well. PPD is performing very well since the announcement. We're on track for a Q4 close.
Integration planning is well underway. We've received our foreign investment clearances. Our regulatory filings are in process. We've already initiated financing, And we now expect to deliver $1.50 in adjusted EPS in the 1st year of ownership. That's up $0.10 from the time of the announcement of the transaction.
Turning to the 4th aspect of why we're so well positioned for a terrific future, we deliver value for all of our stakeholders, our shareholders, our customers, our colleagues and our communities. All of this is enabled by the power of our PPI business system and our mission driven culture. And I thought I would delve into that in a bit more detail. Our mission is to enable our customers to make the world healthier, cleaner and safer. This inspires all 90,000 of us to bring our best gift.
We also are focused on the effectiveness every day, which drives continuous improvement across the company, And that allows us to meet the needs of society and our customers every day. Looking to our ESG strategy, We fundamentally believe in doing business the right way, and we have a tangible commitment to ESG. We fundamentally believe in doing business the right way, and we have a tangible commitment to ESG principles. Robust engagement with all of our stakeholders is integral to our strategy, informing our ESG priorities and driving continuous improvement. On the environmental front, we're focused on reducing our environmental impact by driving operational efficiencies throughout the organization by reducing waste and energy consumption.
And we're also continuously innovating our offerings to assist our customers in meeting their own sustainability goals. On the social front, we're focused on creating a compelling place to work by attracting, developing and retaining a highly diverse team. Leading the industry and talent benefits our colleagues with a great place to have a mission driven career and gives the organization a competitive advantage in the marketplace. And finally, strong corporate governance practices along the way with a very active Board of Directors ensures that we appropriately manage risk. Our latest corporate social responsibility report is going to be published soon and you can look forward to seeing our enhanced reporting on our ESG priorities.
While I'm not going to cover all the details on this slide, I did want to show you that there are very specific actions we're taking as part of our tangible ESG strategy to create sustainable value for all of our stakeholders. So let me wrap up with how we're exceptionally positioned for a terrific future. We are an industry leader serving very attractive end markets. As you've seen, we have a proven growth strategy that drives share gain, a proven approach to capital deployment, and we're delivering value for all of our stakeholders setting up the foundation for a bright future. I'm now pleased to turn it over to Mark Stephenson Michel Lagarde, who is going to give you an update about how our proven growth strategy looks in action.
Thank you.
Thank you, Mark. It's a pleasure to be with you all again this morning, and I'm excited to go into more details really on our growth strategy, specifically diving deeper into our biopharma and biotech industry. Last year, we spent time on one of our key areas in the diagnostics and healthcare. Really, we have 4 very attractive segments to focus on. But today I want to spend the time on really our largest segment, the pharma and the biotech and really take you through our strategy and how that's Driving our core growth that Mark has just taken you through.
Now today in the presentation, Michel and I will take you through Really the key takeaways is that we have a proven track record of driving the growth in our pharma and biotech customers. The prospects are really bright for this segment, and you'll see that through the growth outlook and the funding that's going on in the environment. At Thermo Fisher, we're exceptionally well positioned to execute on these exciting prospects for our customers, And we're really continuing to strengthen our value proposition for our customers. And finally, I'll take you through a couple of examples where Our approach is really differentiated for some of the novel advanced therapies and vaccines that we've now seen come out over the last year. Let me start with our proven track record in driving the growth.
We help every day our customers accelerate their innovation and bring productivity together, really underlined by our quality every day for our customers. We've become a trusted partner to these customers, and they benefit not only by our products, but by our thought leadership, Our capabilities are really just our accumulated experience. Our depth and breadth of capabilities we bring to our customers Has really added over the years and we strengthened this not only through our internal investments, but also through strategic investments. And if you look over the last 10 years, you see that increasing impact as during the last 5 years, you can see our accelerated growth in this segment as the trust that our customers have in our relationship has really come to borne fruit. Mark explained and you all know well our 4 segments.
But if you look specifically on the businesses that to serve our biopharma and biotech industry. You'll see here I've called out really standalone businesses that in their own rights to very powerful successful businesses, but actually we can bring together the depth and breadth of capabilities for our customers, Whether that be in our biosciences businesses, reagents and instruments, now the essential building blocks also used in the mRNA therapeutics, in our genetic sciences, understanding developing precision medicines with companion diagnostics all the way through our incredible bioproduction business that we deliver best in breed components across that workflow. In addition, our analytical instruments are used both in early discovery And also in the manufacturing environment. And then in our laboratory products and services, all the way through our channel businesses, ensuring productivity, Products are available in the supply chain through our laboratory products and chemicals and to our pharma services, everything with the development Services, clinical trials and then as we add in PPD to add in our clinical research services and laboratory services. So altogether, that's about $20,000,000,000 of core revenue from this Pharma and Biotech segment.
Now when you move over and look at the customer point of view, from a customer lens, it looks slightly differently. So the customer will start on their research and from their research environment, start first in thinking about solutions to discover new therapeutics, then look at the products they'll need across phases of clinical development and then formatting into production and scale up. And individual customers may choose to work with part of our business in one of these areas or actually move across in multiple areas from the first early discovery of the idea all the way through to clinical trials and scale up. Through this era, we become a trusted partnership in this relationship. Now in each Step of that relationship, the customer has very specific needs.
So if you think about the research in early discovery, What they're looking for is finding promising new novel targets. They may be starting it up in a biotech coming out of academia into their first lab. They might have been working with us there and then move in, accelerating that preclinical development, getting first in mind trials And then what a reliable partner to work with them through this journey and as they scale looking for productivity in their research. How we're supporting customers through that early phase is not only in thought leadership, experience with our offerings in scientific advancements, We offer best in class products. We allow them to move quickly into the clinic with our quick to clinic services and then really a very comprehensive offering through the Fisher Scientific channel that brings that together with a leading e commerce selection.
With that, let me turn it over to Michel Lagarde to talk about the next phase as they move into development. Michel?
Thanks, Marc. So in this next stage, it's really all about process development and taking that scientific idea that Mark spoke about in early research that was executed on the bench scale and now develop a robust process around it. So customers really are looking for expertise, the problem solving skills required to develop a robust process that ultimately gets the idea ready to be tested in clinical trials. And they have their hair on fire in this stage, right? Because it's really all about making sure that as quick as possible, they get to find out whether their idea works and whether it's safe.
That obviously needs to be partnered with reliability of supply so that they can execute this stage without interruption. So what we offer here is really the Scale of the company, right? It shows up in the accumulated experience that resides within our teams. We really have developed 100 and 100 of molecules and been associated with this exact phase for so many customers. So that means that the teams really are relied upon to bring their expertise to these challenges that our customers face.
We do that by scaling up the cell lines, by using the right reagents, by designing a bioproduction workflow and obviously doing that in our Pharma Services business. Right now, we support them also in the Logistics, the labeling and distribution of clinical trial materials and once we close on the PPD acquisition, we'll add that capability around clinical trial design, patient recruitment and of course the important analytics of clinical trials. That allows our customers to then move to the final stage, the most exciting one, because here we are, this original scientific breakthrough or idea is now ready to be commercially scaled. The clinical trials proved it to be efficacious and safe, and the regulatory authorities gave it its approval. So customers now really are looking for a partner that can scale up commercially.
For our larger customers, That means thinking about which parts of the manufacturing process should they run themselves and their own manufacturing experience And capacity and which should they depend on outsource partners. And for our smaller customers, obviously, they rely completely on external providers of manufacturing services. And so for them it's about figuring out who can best help them in this important phase. And here our experience again comes to bear. We have incredible skill in allowing our teams to work with internal manufacturing and scale up that production process.
Use all of the scale we have in bioproduction and design the right workflow that meets all the quality requirements. And if parts of the supply chain or the entire supply chain is outsourced, Then we're there to help as well. Our industry leading pharma services capability and the accumulated experience there Allows our team to be there for customers and provide reliable commercial scale medicine and gather to patients that so desperately need these. Hopefully, those slides give you a little bit of a sense of the scale and the breadth of the capabilities that we have from our pharma and biotech. Super exciting end market for us to spend time with.
And because we hang out with these customers all the time. Our teams have really developed meaningful relationships. We hang out with the CEOs, the Board members, the And your Capitalists, but also the persons in the lab, the Head of R&D, the Head of Global Supply. These people really rely on our teams at Thermo Fisher and therefore really have reaffirmed over time this label of trusted partner. So we're excited about our capabilities, but we're also very excited about the prospects we have in serving Pharma and Biotech.
And in this next section of the presentation, we'll take you to why that is. First up, the robust market growth that we see in serving Pharma and Biotech. We've been saying this for years, but the science is really awesome. It's really incredible to see the amount of innovation that exist in this marketplace. That has resulted in a very robust funding environment, both on the VC side as well as in biopharma, which then has yielded an incredible pipeline of molecules.
Never has been there this many projects in development, which give us the insight that growth in serving Pharma and Biotech is going to be incredibly robust. And because drug development takes a couple of years, it means that we have great forward visibility into the durability of this growth for this segment. That's why we're so excited to serve these customers. And then we're continuously strengthening our customer value proposition for them. I'm a little biased, but I happen to think it's quite unique.
We have a global team of people bringing products and services to these customers to drive productivity, accelerate their innovation and all underpinned by quality. And we take lots of actions to continuously strengthen that value proposition. One way we do that, R and D Investments. You see some of that here on the chart. We've meaningfully stepped up our investments in R and D, which allows us to bring such impactful innovation that you see here on the slide.
We do that across all phases of the molecule journey. And all of this innovation is informed by the insights we bring because we get to hang out with these customers. It really allows us to take the problems that these customers are trying to solve. It really allows us to give feedback into our R and D teams to know what works and what needs to be improved. That's why product innovation is so meaningful coming from Thermo Fisher.
And that's why you see when we launch something like the Dynadrives As you see here on the right, the industry response is so impactful because we truly are bringing fit for purpose products and solutions that really helps our pharma and biotech customers accelerate their work. So in addition to R and D investments, We also have increased and stepped up our investment in CapEx, pulled forward a lot of our CapEx investment plans. In a pretty short period of time, 3 years as you see depicted on the slide, we have spent $4,300,000,000 in support of all of this. Three main categories: expansion of bioproduction, expansion of farmer services capacity and significant investment in new modalities. These are high return investment projects because they're underpinned by customer demand.
And because of our scale, we're never dependent on an individual customer project, but rather we're able to underwrite to demand as it exists across the industry. Let me take you through the specifics of these 3 categories. First up is bioproduction where we're making a $1,000,000,000 investment to double in the case of purification, triple our installed capacity. We already operate an industry leading network of capability and capacity here serving customers around the globe. And these additional investments allow us to continue to expand to keep up with customer demand and also provide regional redundancy and supply.
It's a network of individual sites that come together under a global set of manufacturing processes and a global quality system. In Pharma Services, in this period, we're spending $2,100,000,000 in CapEx, basically doubling our biologics drug substance and our sterile fill finish capacity, all to keep up with the explosive demand of Biologics Drugs. Again, we have an industry leading capacity and network that we're adding to both in terms of scale and existing sites and as you can see on the slide adding some new capabilities particularly in the Asia Pacific region so that we can continue to serve customers in that fast growing environment. And then the 3rd category of capital expenditure investments is in new modalities. We're spending $1,200,000,000 to support these new and exciting advanced therapies.
In our biosciences business, that means where we make nucleotides and enzymes, additional capacity to serve all of the demand. These are critical building blocks that go into these advanced therapies and vaccines and customers really rely on us to provide those around the world in a regional redundant network of high quality sites. In Pharma Services. It means significant expansion of our capacity and support of cell therapy, gene therapy and the enabling components of plasmids manufacturing and mRNA manufacturing. Again, to be there and support our customers as they embark on the exciting adventures in these new modalities.
Because of the robustness of the end market growth here, you heard me talk about increased R and D investment, increased CapEx investment. And as this slide shows you, we also have been able to deploy significant M and A dollars to strengthen our value proposition. We're constantly looking at capabilities that we should add to be an even more meaningful supplier of products and services to Pharma and Biotech customers. And as you can see, we've done so successfully across all the stages. This has allowed us to continue to be there and be the trusted partner to our customers in this segment.
So I'll hand it off to Mark who will double click on the work we're doing to support advanced therapies and new modalities. Marc?
Thank you, Michel. So Mark showed this slide earlier and really shows a very unique model how we work early with our biotech and pharmaceutical customers. We collaborate with key innovators That allow us to see modalities coming through early, new innovations and then develop best in class products, Add to that with a portfolio depth and bring that together with pharmaceutical services. This really allows us See things early to develop them through to commercial scale and scale up over time meaningful relationships. And I thought I'd use the examples of some of the new modalities that our biotech and pharmaceutical customers have been developing to bring this to life.
So in the first example, let me turn into mRNA. And in the case of mRNA, You've seen the announcements come out from Pfizer and Moderna and others, but really early on we were engaged Many years ago with the Modernas, with the BioNTechs, as we started to help them in their work, work early in phases, I look at developing the right products. Some of those are best in class fit for purpose products. You see listed here the oligos and enzymes and then expand in that portfolio across the workflow of the mRNA through from the synthesis to the purification into the delivery. And so we've added to those capabilities and then you see the announcement from our partners as they scale up now with us as we bring in our pharmaceutical services to allow manufacturing, fill and finish and the investments that we're making.
This approach allows us to take a new modality That wasn't a surprise to us as we saw it coming through and then develop that at in scale. Let me take a second example that is now on the horizon, some of the next generation cell based therapy products, to an emerging next generation class of molecule as a therapy. And again, really, we can work early on to identify the key customer needs. We set up collaborations with some of those early collaborators. You saw our announcement with the University of to California and San Francisco, their Mission Bay campus to collaborate here.
And then out of that, develop not only leading class, best in class products, But actually put them together in a portfolio that meets those customer requirements who want to manufacture at scale and then do that also as a service offering. So really a unique way to bring together the breadth of capabilities for our customers, anticipating what's next and scaling up over time with them. So in summary, we're very excited about our proven track record for our pharma and biotech. You. This is our largest segment, so we wanted to spend time on it today and outline for you just the strong prospects that we have going ahead.
We're well positioned, both for the current modalities and what's coming forward. And with that, I'll turn it over to Stephen Williamson to take you through some of the rest of the financials. Thank you all today. Stephen, over to you.
Thanks, Mark, and good morning everyone. It's a real pleasure to connect with you today and share a very exciting financial future. As you've just heard, we've executed really well in the past and we have the opportunity, strategy and proven execution methodology to continue to do that going forward. Let me now bring all of that together in a financial context. Before I get into the details, I thought it would be good to frame up the key themes you'll hear in my presentation.
You have incredible track record of consistently delivering. Our end markets are very attractive and we're really well positioned in Pharma and Biotech, our largest to fastest growth end market. The pandemic was the latest example of how well we operate in any macro environment, delivering the industry's largest response, while at the same time investing to accelerate our long term organic growth. Our growth strategy, PPI Business System Execution and disciplined capital deployment methodology are all proven and continue to create long term sustainable value. And this all leads to a very bright and exciting outlook for the company.
So let me orient you on the flow of the presentation. First, I'll recap on our track record, and then I'll remind you of our 2021 guidance, the guidance we issued on our Q2 call back in July. And after that, I'll provide you with details of our initial 2022 guidance. This guidance will give you a good feel for how the company looks after the majority of the COVID-nineteen testing revenue is behind us and after we close PPD. I'd then use the end of 'twenty two as a jumping off point for the start of the long term model.
That model is our usual 3 year convention, this year for the years 2023 through 2025. So let me start with that track record and I think it speaks for itself. As Mark outlined earlier, we consistently delivered over many, many years. As strategy and PPI Business System Execution have proven. And this has delivered very strong top line growth, which has been converted not only into excellent growth in profit, but also excellent growth in free cash flow.
And that performance has been delivered while also significantly investing in OpEx All the key technology areas. This is driving an incredibly strong pipeline of high impact innovation that's making a material difference for our customers. And then on the right, you see the scale of the ramp in CapEx over the past few years. And as you just heard from Michelle, we've accelerated the capability and capacity investments across many of our businesses, investing in high return projects underwritten by great customer demand. And those are just a couple of the areas we're investing to accelerate growth.
We're also investing in commercial capabilities, the OpEx required to run the significant capital expansions, investments to give back to our communities and investments to reward and recognize our colleagues. And all of this is helping fuel extremely strong long term organic growth. So let me move on now to a recap of our guidance for 2021 and we'll continue to execute really well in 2021 and we're on track to deliver another excellent year. On this slide for reference, you can see the assumptions underlying the guidance I gave a few weeks ago on our Q2 earnings call. The data on this page and the next one are unchanged from the guidance on that call.
And we look forward to updating you on progress made through Q3 on our earnings call next month. The output of the guidance assumptions is summarized on this slide. Another excellent year with 9% organic growth, which includes 12% organic growth in the base business and 13% growth in adjusted earnings per share. To another year to be added to that long track record of consistently delivering exceptional returns. So I recognize that our outsized success in terms of the COVID-nineteen response has made it more challenging for investors to understand our financials.
And I regularly get questions around what our P and L looks like once the pandemic is over. To help you better understand that going forward financial profile. I think it's best to look at our 2021 revenue in 2 pieces. The first is our core revenue, Which is $31,000,000,000 in 2021. And that's what we termed in the past base business, plus the $1,800,000,000 of vaccine and therapy related response revenue.
So think of that together as our permanent revenue base. And due to the significant long term underlying demand from our pharma and biotech customers, we expect the vaccine and therapy related response revenue will switch to non COVID customer activity over time, which is why you should think about that as core revenue. The other part of our revenue is the testing and testing related response revenue. The majority of this is temporal in nature. We'll continue to do an excellent job supporting customers' COVID-nineteen testing needs for as long as required and we'll flow the benefits of that through the P and L.
At the same time, we'll look for ways to sustain revenue streams from that testing related response in areas like sample prep a new regulated content, for example, and these will become core revenue over time, but the majority of the testing related revenue is likely to be temporary. So when thinking about the long term financial profile for the company, we have a very sizable core revenue base, which gets even bigger when we get the addition of PPD. And we expect that core revenue base to grow very strongly going forward. So moving on, now the initial 2022 guidance. And I'll start with the detailed assumptions behind the guide and then I'll summarize the guidance numbers.
I'm going with initially for 2022, a similar convention we've used in our current 2021 guidance. And then I'll complete the 2022 view with a comparison to the last long term model that I shared with you back in 2019. There's a significant beat versus that model and it really demonstrates the strength of our performance. So here are the key assumptions for the initial 2022 guidance. Starting with revenue.
Building off the momentum of 2021, we expect core organic revenue growth of 8% in 2022. There's a range of outcomes for testing related COVID-nineteen response revenue next year, which will be determined by how the pandemic continues to play out. For this initial guidance, we're taking the same approach as we took for the 2021 guidance and significantly derisking the outlook for testing. So the initial assumption for 2022 guide is $750,000,000 of testing related response revenue for the year. And then finally on revenue, we have PPD.
I've seen the acquisition closes December 31 this year, so we get a full benefit of PPD in 2022, currently estimated to be just under $6,000,000,000 of revenue for the year. From a margin standpoint, we're expecting adjusted operating margin of 25.2% for 2022. And that includes incorporating PPD into the company at a mid teens margin. Excluding PPD, that makes the margin of the rest of the company to be 27.1%. Turning to cash flow, our initial expectation is free cash flow and CapEx at similar levels to 2021.
And then through active management of our debt portfolio and accessing favorable debt markets, we expect net interest costs to be roughly flat to 2021, and that includes the financing of the PPD acquisition. Initial view on the 2022 tax rate is 13%, slightly lower than 2021 due to effective tax planning and the benefit of PPD. In this outlook, we've not factored in any impact positive or negative from potential tax reform. You have a very efficient tax and treasury structure that continues to drive great value and create competitive differentiation. And We'll appropriately navigate any future tax reforms and expect to retain our competitive differentiation.
Now turning to PPD, given the ongoing strength of the performance of that business and our latest outlook for financing costs, as Mark mentioned, we've increased the expected first full year accretion for PPD to $1.50 And it's worth noting that this includes $0.16 of non cash headwind from the acquisition accounting for deferred revenue. This is a placeholder for the impact and represents $75,000,000 of both revenue and margin. The impact of this unwinds over the next couple of years. In terms of other capital deployment assumptions, The guide assumes $2,000,000,000 of share buybacks spread evenly over the year and an increase in our dividend in line with prior year's increases. So with those assumptions, our initial guide for 2022 is $40,300,000,000 of revenue to $21.16 of adjusted EPS, which is a really strong outlook for the year and a great starting point for the revised long term model, which begins in 2023.
And as I mentioned, this guidance assumes $750,000,000 of testing related response revenue. And to help you with your own modeling around scenarios for testing revenue, we estimate that for each additional $100,000,000 of testing related response, We'd expect to print around $0.06 of additional adjusted EPS. So flowing through around the company average margin and that factors in the likely mix some pricing of the revenue as well as an element of reinvestment. As we learn more about how the pandemic evolves, we'll continue to refine our assumptions and share them with you. So this is the initial view on 2022 and as you can see, it's going to be another year of excellent financial performance.
So the last long term model I provided you was back in May 2019 and that covered the period 2020 to 2022. And as you can see from this slide, We'll significantly over deliver on that commitment for 2022. And think about what we've done in between. We've navigated a pandemic related recession. We've delivered the industry leading response to COVID-nineteen, operating with speed at scale to make a huge difference for all of our stakeholders.
And in that 3 year period, we will have delivered $4,400,000,000 more free cash flow than we'd originally planned, even after substantially accelerating OpEx and CapEx Investments. And we end this period with materially higher sustainable organic growth. We're very proud of what we've done, but we're even more excited about our future prospects. So with that, let me now move on to our new long term model. As I mentioned earlier, this long term model is for the 3 years, 2023 to 2025 and it builds off that 2022 initial guidance that I just presented.
And here's the output of that model. By continuing to combine that very strong operational execution and disciplined capital deployment, We expect to continue to generate exceptional shareholder returns. And over this 3 year time horizon, we expect to deliver 14% to 15% average annual adjusted EPS growth, a really bright financial future driven by the continued consistent execution of our strategy. What I'll do over the next several slides is give you more detailed assumptions behind the model. And as I've done in the past, I've split it into 2 pieces.
First, I'll cover what to expect organically, meaning what returns to expect from us running the business as it is today. And that's really important as it reflects how we spend the majority of the time running the company, laser focused on delivering organic returns on investment. And then I'll layer on assumptions around capital deployment and how we manage below the line to get to that total view that drives this 14% to 15% adjusted EPS growth. So moving on to the assumptions behind that long term model, again, before capital deployment. The first key assumption here is 7% to 9% core organic revenue growth.
As you just heard from the prior two presentations, we're very growth outlook. It highlights how well positioned we are to uniquely enable the success of our customers. And using our proven PPI business system will translate that very strong top line growth into great growth and profitability, enabling us to expand margins 40 to 50 basis points from that 7% to 9% organic revenue growth. But it's not just about growth and accounting profits. We'll translate that into equally strong free cash flow generation.
As I mentioned earlier, this is something that we've done really well in the past. And as a reminder, that's after fully funding the OpEx and CapEx investments to keep fueling organic growth for the future. All this creates excellent organic returns on investment. So that's the detailed assumptions. And on this next slide, I've summarized the expected output.
And again, this is that's the expected output from us operating the business on an organic basis before future capital deployment. And I think you'll agree that this is a really bright financial future in itself. We expect to end the period with revenue of approximately $50,000,000,000 to margins of over 26%, generating great returns on investment over the period, averaging an annual improvement in adjusted ROIC of over 140 basis points. But there's more. We'll drive additional return by deploying capital as well as running the business very effectively on an organic basis.
And as you think about our capital deployment It's important to understand that we'll fully fund high return organic OpEx and CapEx investments. And even after doing that, we have substantial cash left over to deploy. And that remaining cash plus the excellent strength of our balance sheet gives us substantial capital to deploy over time. Our strategy for capital deployment has been very successful and remains unchanged. Our primary focus remains M and A.
We're very effective consolidator in a fragmented industry. We're disciplined in our approach, focused on the right balance of risk and return. We look at everything pass on most and execute really well on the things we choose to buy, generating great returns on investment from M and A. But at the same time, we'll also return substantial capital to shareholders. We expect to continue to grow the dividend over time, but the primary means of return of capital will be buybacks.
The takeaway is that we expect to continue to deploy substantial amounts of capital and drive great returns for all our stakeholders. So now on to the final output of the model. Taking that strong organic operational performance, layering an effective management below the line and effective capital deployment, we drive exceptional financial returns. In terms of the assumptions in the model, I've assumed $48,000,000,000 of capital deployment, split 60 five-thirty 5 between M and A and return of capital. So just over $30,000,000,000 of M and A is assumed in this model.
Consistent with past modeling methodologies, I've assumed that M and A is a series of mid sized deals over the 3 year period. In terms of leverage, the goal is not to achieve a specific leverage ratio, it's to maintain investment grade. As you can see my modeling assumption here on the page, but the actual leverage in any given year will depend on the timing and scale of M and A. But in terms of tax, and modeling a modest increase in the rate over time driven by the increase in profit dollars. So our day to day execution Consistently drives very strong organic operational performance and this coupled with our effective capital deployment enables us to drive the 14% to 15% average annual adjusted EPS growth, a really bright financial future.
So let me end where I started. On the left hand side of the slide, same key themes I teed up at the beginning of the presentation. To incredible track record. Our end markets are very attractive and really well positioned in Pharma and Biotech, our largest and fast growth end market. Pandemic was the latest example of how well we operate in any macro environment, delivering the industry's largest response and at the same time investing to accelerate organic growth for the future.
Our growth strategy, PPI Business System Execution and Disciplined Capital Deployment methodology, they're all proven and continue to create long term sustainable value. And this all leads to an excellent outlook, enabling us to continue to consistently deliver exceptional financial performance. The formula for that performance from our updated long term model is summarized on the right hand side of the slide. All of this drives a very compelling financial future and I couldn't be more excited about our prospects. So with that, let me now hand back over to Mark so he can recap the presentations.
Thank you. Over to you, Mark.
Thank you, Stephen. Let me summarize the day before we go to Q and A. When you think about how exceptionally positioned we offer our future, we serve great markets as the industry leader. We have a proven growth strategy that drives share gain. Our proven approach to capital deployment creates shareholder value strengthening the company, and ultimately, Our strategy has allowed us to deliver value for all of our stakeholders.
We're going to take a 5 minute break, and then I look forward to your questions. Welcome back. We're looking forward to your questions. I'll turn it over to the operator to start the Q and A session.
Our first question is from Tycho Peterson of JPMorgan.
Hey, thanks, Mark. Appreciate you hosting the Analyst Day. I want to start with the 2022 outlook. You're increasing PPD accretion before closing the deal. I'm just wondering if you can talk to that, how That's higher revenues versus the financing costs.
And then on the COVID front, you know, I appreciate your quantifying, you know, COVID testing. Obviously, a big step down from this year, but I think we're all gonna get It's a question about what's assumed for vaccine and therapy tailwinds versus the 1,800,000,000 this year. I know you want to include it as core, but, you know, any color around vaccine and therapy Contributions for next year would be helpful. And then a follow-up on the long term guidance, you know, 79% is phenomenal, obviously better. I think most people are Backing 6 to 8 and a big step up from 5 to 7.
What does that assume for end market growth and does it factor in a step up? And then what does it assume for PPD growth longer term? And then just lastly on PPD, I'm curious how you're thinking about the lab services part of the business and if that's an area for expansion? Sorry, I know that was a few questions, but appreciate it.
That could be the record, Tycho, but they're all great questions. I'll try to get at those. So starting out with the 2022 and a couple of the assumptions there. You know, in terms of the vaccines and Scenes and therapy revenue. We expect that it will grow in line with the greater growth that we have for next year.
And over time, as there's less demand for the specific COVID revenues for vaccine and therapy, that will transition to other of our customers. In terms of the longer term outlook or in PPD, the drivers of PPD for 2022 It's really based on the more favorable financing costs right now. The business obviously performing well. And when that year closes, we'll update as we would always in January on those assumptions, but the financing costs are more favorable and is driving the $0.10 improvement. When I think about the longer term model, You know, what we're assuming is that 4% to 6% underlying market growth rate in that period of time and our ability to be able to continue to drive very strong rates of growth going forward.
Tycho, I know I missed at least one of the questions. So can you repeat what I missed in that? And I'll try to get that.
Are you thinking a step up in PPD growth longer term? And then also on the lab services business, how you're thinking about that part of the PPD?
Yeah. So in terms we're assuming that the PPD business It's growing at similar rates to the company to slightly faster. And the lab services is a integral part of the offering that PPD brings to its customers. Thank you, Tycho.
Our next question is from Jack Meehan of Nephron Research.
Good morning, Jack. I don't hear you.
Good morning. Now I am unmuted.
Great.
Mark, so I wanted to follow-up and get your thoughts on the Contribute to sales longer term. And then kind of similarly on the vaccine side, just the level of confidence that there's going to be a smooth handoff longer term, depending on what's to come with COVID.
Yeah. So, Jack, in terms of let's do testing first, right? You know, one of the things that Everybody on this call knows is that we've played a enormous response in enabling the testing around the world and our PCR tests, both in the laboratory as well as the addition of the point of application or the point of use with Mesa has been strongly adopted. And one of the things that our investors said certainly towards the middle of the year is that it's very hard to predict. So we actually derisked the assumptions within the numbers for this year, as well as for next year, where we picked a number that I think is a you have a very High degree of confidence that you're going to be able to deliver that number.
But there's obviously a range of outcomes above that as well, which is depending on how long the pandemic plays out and what the back to life applications are. I would expect that there's a range of outcomes and you have the financials around for each $100,000,000 of revenue above those numbers, what that's worth. When I think about, as Stephen said, the transition of that portion of our revenue to other applications post COVID. Clearly, the huge installed base of sample preparation and qPCR instruments, Us adding content is going to generate a meaningful revenue stream going forward, but it's obviously going to be meaningfully less than the many 1,000,000,000 of dollars of response revenue on testing we have today. So that's how we thought about that.
In terms of vaccines and therapies, You know, we expect that we'll grow that in 2022. We'll see how the pandemic plays out in terms of what the demand is longer term for COVID-nineteen Vaccines and therapies. And beyond that, you know, given the size of our pharma services business, the relationships we have with our customers, we think that's It's going to be a relatively smooth transition and certainly during the course of a 3 year period, you're certainly going to be able to manage through that entirely very effectively.
Our next question is from Doug Schenkel of Cowen and Company.
Good morning, Doug.
Good morning, Mark. Thanks to you and the team for doing this. There's been a lot of focus on Biopharma related growth drivers this morning as well as on the impact of COVID related demand on the business in the near term and the long term. Yes, that's quite understandable. But there has been a bit less focus today on other end markets.
I'm just wondering if you could share a little bit on, how you're positioning yourself during this period of Bust biopharma and COVID related demand for, you know, a, improving academic funding, you know, which sure looks like it's in the near term offing and b, you. For increasing demand in more cyclical end markets, I think those could I think folks could come out of today's event maybe overlooking those other drivers that could really contribute to the long term growth of the business. And maybe as a related follow-up What are the assumptions you're embedding into your long term financial targets for different end markets and geographies? I know that's not necessarily how you roll up things, but If you could talk about that a little bit, that would be helpful as well. Thank you.
Yes. So so, Doug, you know, thank you for the question. You know, a year ago at this analyst meeting, We focused almost entirely on diagnostics and healthcare, right? That was, you know, we did a deep dive there and how we were enabling a COVID response and the strength of the offering. This year, as Mark said, we pivoted and wanted to focus in on pharma and biotech, but we have amazing activities going on in serving all 4 of our end markets, academic and government, industrial and applied as well.
So they're important to our future. We've significantly increased the size of those businesses over time. And We look forward to going forward. When to look at academic and government, as you said, I think funding continues to look very bright, given the lessons learned of the pandemic, how governments are investing in science. When I think about the supply chain assuredness aspects of things going on.
You're seeing investments there and all of those things bode well for the strong market outlook. And when I think about the longer term And I think about our 4 end markets and you look at our company growing at 7% to 9% organically, pharma and biotech will grow a little bit faster And that rate of growth in the other three end markets should grow just a little bit under that rate of growth is what's baked into those assumptions.
Okay. Our next question is from Vijay Kumar of Evercore ISI.
Hi, Mark. Congrats on a very impressive Analyst Day here. I had 2 questions, 1 on the LRP in one on fiscal 2022. The 7% to 9% guidance, I mean, this is impressive, 9%, I think I haven't seen any of your peers in large cap plan put up a 9 number. What is driving this?
Is this just a change in your end market revenue I'm looking at your slide. Pharma Biotech almost doubled up. Is that what's driving this? Or have the end markets accelerated? And then I'll set the follow-up.
Maybe let's start with the LRP.
Yeah. So, Vijay, thanks for the question. You know, and when you think about the philosophy of the management team, right, which is when we set a new long term target, we have to already be at that rate of growth, right. It's not what the future might bring, but rather we have a confidence in delivering that level of growth. And that's what we've been delivering for a while now.
And when you think about the long term and why we're confident in the ability to drive 7% to 9% organic growth over this period. It's really driven by a few factors. The first of which is the end markets are strong. We have a very unique value proposition for our pharma and biotech customers in particular That's part of a proven growth strategy. And that combination of the growth strategy and good end markets allows us to continue to drive excellent growth.
One of the things we said back in March of 2020 is we had 3 guiding principles coming to how we'd manage the company through the pandemic, ensuring the safety of our colleagues, enabling our customers to do the important work they're doing and the societal response to the pandemic and exiting the pandemic as a much stronger industry leader. And what you saw today was the essence of the 3rd part, which is coming out of the period, a much stronger industry leader and our confidence in the incredibly bright future that we have in terms of organic growth and translating that into strong financial performance through margins, EPS and free cash flow.
Understood. And then one on fiscal year 'twenty two, I think the 8% core assumption, Yes, that's coming off of a 12% comp. Anything on from a comp perspective, we need to be concerned about. And The vaccine assumption, I think the street's at 1,500,000,000. Is that the current view of 1,500,000,000 the right starting point?
Stephen, you want to talk a little bit about
March 2? Yes, thanks for the question. When I think about the 8% growth next year, That includes vaccines and therapies growing well. So it's not an outlier one way or the other on in terms of organic growth. So Assuming it's growing from the $1,800,000,000 that we have for 2021.
So I guess the best way to think about the organic growth profile. Missing another second part to that question or is that I get to it.
Sorry, the $1,500,000,000 of vaccines, so that's Increasing that's growing next year to $2,000,000,000 ish. Is that the
number that's
baked in?
That's the assumption in the model, yes, into the guide.
Fantastic. Thank you, guys, and congratulations.
Thank you. Okay. Our next Question is from Derik de Bruin of BofA Securities.
Hey, good morning.
Good morning, Marc.
Hi, Steven. So a couple of questions. I guess the first one, Stephen, what are the CapEx assumptions built into the 23% to 25% guide?
Yes. So good morning, Derek. So when you think about the CapEx and what we've done in the past several years, we've generated fantastic opportunities to support our customers both short term and long term and we're fully funding those. And when I think about the return profile, the risk profile, Those are very easy decisions to make and we're making sure that we're fully funding the opportunities and the commercial teams are then filling the right pipeline to actually maximize that So you've seen us increase the CapEx in the areas that Michel outlined in his presentation. And when I think about going forward, we will make sure that we're capturing all those great you.
Opportunities that are kind of new opportunities coming up. The exact level will basically depend on the opportunity set to make sure that we can keep fueling organic growth. And When I think about how we're managing the company, it's not to a specific number on CapEx, it's really making sure that we're actually generating the combination of long term organic growth margin expansion and then generating the free cash flow. And we've been able to match that cash flow generation to EPS growth for a long period of time, and that's what's built into the long term model as well. So in terms of what I'm actually planning in that Model, it's roughly around roughly 3.5% to 4% of revenue over that average over that period.
But each year, we'll assess the right opportunities and make sure we're organically investing in the great opportunities that we'll be able to generate from our customers.
Great. And another question, it's like you're looking for like a mid teens adjusted operating margin on PPD. Is there upside to that number from the PPI initiatives? I mean, how do you sort of like squeeze additional margin out of that business?
Yeah. So, you know, it's a PPD is an incredibly well run business and we're excited to bringing it and the colleagues to be part of the company. You know, the benefit of the strong growth, the benefit of the PPI business system and the synergies that we will get we'll take that business from the mid teens to the high teens over time. So you'll see margin expansion there as well.
And to add a little bit more color to that, I mentioned the deferred revenue disallowance that unwinds over a couple of years that helps with margins to help part of that profile. And then PPI is not just about you kind of putting across as it's kind of cost out, it's also enabling growth. So that's going to help this business, high growth business grow even better and as well as then appropriately address the synergy opportunities that we Sure. And as well as inappropriately address the synergy opportunities that we have as a combined company.
Great. And then
just one final one. Mark, obviously, you've become a much bigger player into the pharma and biotech industry. If you sort of look at The history of that industry and you go back to like the financial crisis and some of these other ones, you had periods of pharma consolidation. You had You had the patent close and such. I guess when you look at the pharma space, Are you worried all about drug pricing initiatives and what those could sort of impact on the R and D?
I guess there's the question of What are you worried about in pharma? What goes wrong if you put more of your eggs into that pharma basket, right? So it's a question Yes. It's a great market now, but is there some sort of event on the is there something that event on the horizon that could implode it?
Yes. So, Derek, thanks for the question. And, You know, when I think back over the last 20 years, right, there are periods where, as you picked out a couple, the financial crisis or patent cliffs, We grew strongly with our pharma and biotech customers, even in the most challenging times. Why is that? It's because we enable work they're doing.
We in those periods of time, we help them drive productivity. And we did such an excellent job that we're able to continue to increase our relevance, our share of wallet and grow our business. And, you know, there'll always be headwinds in every market that need to be navigated by our customers. And we're an essential partner to help them do that. So we pay attention to it and we'll play a role in supporting the industry, which given science and given the impact that they're having on society that the future here looks very bright for Pharma and Biotech.
Thank you.
Thanks, Derek.
Our next question is from Dan Arias from Stifel.
Hey, good morning, guys.
Hi, Dan.
Steven, you mentioned in the long term guide that pricing is part of how you'll derive the 40 to 50 bps of margin So as you look across the business and the way that things have shaped up just COVID and non COVID, are there areas in the portfolio where you think your ability to TIG prices improved and are giving you new opportunities. Or should we just think about the pricing gains that you'll see strategy that you have as being more or less steady and in the areas where you've typically been able to take things up.
Yes. From a pricing perspective, Dan, what I would say is, I think the historical assumptions of you. 50 to 100 basis points of pricing is probably a good assumption over the long term. We are able to pass through a level of pricing and It's well adopted and accepted in the industry. And it may evolve a little bit in the shorter term with some of the inflationary pressures that are going on across the economy.
And you. We're working very collaboratively with our customers to have pricing that's appropriate for the shorter term environment, but I don't think you'd see big changes over the next few years.
Yes. And then just to add to that, that's on average over the whole portfolio and that's pretty much how it's played out over the extended period of time as we've been running the company. So it's an expectation going forward.
Yes. Okay. And then Mark, if I could just ask a follow-up on bio I appreciate you sizing the capacity expansion activity for us. I think that's helpful. Are you able to sort of just Crystalize what kind of incremental revenue capacity you think is associated with that by the time we get to the end of 'twenty three?
Yeah. So the way that we think about is if you step back and you look at the $20,000,000,000 of our revenue, right, in serving pharma and biotech, you know, roughly 5,000,000,000 of that is in our pharma services business, roughly $4,000,000,000 of that is in the technologies used for bioproduction across that range, so about half. And what you're seeing with those investments is to be able to fuel the growth not only through 2025, but beyond. And you're seeing us expand both pharma services and bioproduction capacity to enable that. And at the same point in time, adding new capabilities to really help our customers achieve what they need to achieve.
You. Those capital investments are supporting the growth associated with the financial model.
Okay. Thanks so much.
You're welcome.
Our next question is from Patrick Donnelly of Citi.
Thanks. Mark, just on the deal side, the last couple of deals have been a bit out of the core tools world with Patheon and PPD. How should we think about your priorities going forward? And then any change in your approach to metrics you look at for deals? You know, it feels like the market seems to be leaning in more towards, Heavy growth deals, some peers have focused a little more on kind of out year ROICs than a strict number.
You kind of have to hit by year 5. How are you guys thinking about that as you look at deals? And I just have one follow-up.
Sure. So when I showed the chart from 2010 to 2021 and a number of scale deals and to be able to make the statement because of the amazing team we have around the world that all of them were successful achieving the financial milestones, making the businesses better. And, you know, and those things, that's a discipline that we have in our M and A strategy that we will continue to do going forward. And when I look at that, You know, I think about the additions of Patheon or PPD as very core to who we are. We are talking to our customers every day about what their biggest challenges are, what do they need from their partners.
And we've expanded our service lines and our product lines over time, you know, to be able to meet those evolving needs. So, you know, so I think that's how I would look at it. In terms of, you know, returns And what we want to do is future deals on that chart. We want to be in a position that we can say, just like we said today, that the future deals are as successful as the historical deals. So we're going to hold ourselves to a, you know, high standard on financial performance, high standard on the risk reward, you, trade offs and ultimately deliver for our shareholders.
So that's how I think about it, Patrick.
Okay, Great. And then just a quick follow-up on China. I know you're always a long term bull there. Can you just talk through the growth outlook, your positioning there? I mean, I know near term macro data has been a little mixed.
We'd love your perspective and again how you're thinking about it over the next few years here.
Yeah. So China today represents roughly 10% of our revenue. As you look to the future, I would expect that it would continue to be one of our fastest, if not our fastest growing country long term. We continue to play a meaningful role in supporting the economic growth within China. We highlighted some of the work today that we're doing in the pharma and biotech industry.
And so we feel good about that. And obviously, we've been able to drive very strong growth globally across all of the markets. And we expect that our global end markets are going to be good. So kind of as a percentage of future growth, probably China plays a little bit less of a impact on the financials going forward, but still a meaningfully positive contributor to our growth.
Great.
Thank you, Mark.
You're welcome.
Next question is from Puneet Souda from Leerink. Good morning.
Hey, great. Thanks, Mark. First of all, thanks for the excellent update here and really great to see the long term outlook. Broad Question for you on a high level. As you required, Patheon Brammer, a number of assets, including FEI, Biomolecules and biologics across the industry have gotten significantly more important from maps to cell and gene therapy.
They've proliferated. Manufacturing is a lot more complex. You are having a lot more touch points today than before. Your growth rate has gone from 5 to now at the high end of the 9%. So wondering, you know, from it from a sort of from a industry perspective, do you see, you continued larger targets, 1st of all, that you can pursue here with that Type of a growth profile, maybe even more than 9%.
And on the margin side, is there any in terms of margin lift, gross margin lift, Is there anything unique about biologics and the touch points that you're having that should continue to lift your gross margin here longer term?
Yes. So so, Puneet, when I think about a addition to our portfolio from an M and A perspective, right. We actually don't put the organic growth of that particular business as the primary driver, right. We use our criteria, which is, will customers value it, We'll enhance the company's strategic position and can we generate strong financial returns. And I'd like to think about some of the businesses that we acquired At the time of acquisition, we're actually growing slower than the average of the company and we've been able to add value in such a way that the combination has allowed the company to continue to growth rate.
So I worry less about exactly what the growth rates of additions are. And there are you, many different ways that we will continue to invest that $30,000,000,000 of capital that Stephen talked about on M and A in the out years of the model. What was the second question, Puneet, again?
And gross margin on biobiologics.
Do you want to talk a little bit about that, Stephen?
Yes. So Actually, it's interesting on question on gross margin side. Each business is very unique in terms of the margin profile. Some have High gross margin, low cost to serve in SG and A, others have much lower gross margin and very low cost to serve. So it's less a push to change that gross margin.
We get rewarded for the value we bring our customers. So I think on average, it's been about the same. It hasn't been a big mix I don't think it's going to be we're not counting on it being a big mix driver going forward. So it's more looking at the bottom line and thinking about the incremental margin profile there.
Okay, great. And last one for you, Stephen. In terms of the operating leverage, you're laying out 26 Percent off margin is slightly higher than that in the 2025 outlook. As you look at the overall organization today, you have significantly more leverage, obviously a much more larger organization, given the PPI efforts and the focus that you have on lean. How should we think about that on the upper end of that beyond 26%, if you could help us understand some scenarios there potentially on the upside.
Yes. So when you think about the profile, that 7% to 9% organic growth delivers 40 to 50 basis points of expansion. And as a reminder, that includes continuing to fuel the investments required for more long term growth going forward. So that profile assumes that you're doing a lot of work behind the scenes to continually get the We get the benefits of scale of the company and continually to look for ways to be better and lean out what we do and improve the operational infrastructure underneath. And think that's a good pace.
So it's kind of the pace we've been on and I think that's a good pace going forward and that has longevity beyond this model as well. So I feel really good about that kind of 40 to 50 of that level of growth. Thanks, Puneet.
Our next question is from Tejas Savant from Morgan Stanley.
Hey, guys. Good morning.
Good morning.
Just just one quick follow-up on the vaccine commentary, earlier, Mark, you you mentioned vaccine and therapeutic revenue increasing in 'twenty two versus 'twenty one. Just given the some of the skepticism in the FDA around boosters, Are you factoring that in or would that all be upside if that were to come through?
Michel, do you want to talk a little bit about the landscape?
Sure. Now obviously it's been a privilege to serve so many pharma and biotech customers in support Of the COVID vaccines and therapies and, you know, we'll continue to do so. Our engagements around The level of that type of support really comes from our conversations with them and the commitments they make with us, Right. And so they will navigate the right regulatory environments around the world. And once they sort of decide on what their plan is around that.
They'll come to us and we'll provide reliable trusted manufacturing services and products for them. So, I think the forecast as we laid it out for 2022 in particular really is based on that engagement we have with our customers.
Got it. That's helpful. And then on PDD, Mark, as you think about some of the potential synergies here, you laid out a really nice It's like talking about how you serve the entire biopharma continuum from development to commercialization. How are you thinking about sort of bundle pricing or perhaps, You know, a strategic partnership structure, are those conversations that you're starting to dip your toes in with some of your larger customers?
Yeah. When you think about the importance of the work that we do, really pricing is not the is not the enabling factor. And You know, what really enables is expertise, and credibility. And that combination is what, will allow us to continue to Take an excellent business and continue to accelerate its growth over time. So that's really been the nature of the dialog.
And, you know, the feedback from our customers from the time of the announcement, even right up to today. Right? It's just incredibly positive. They are very excited about what we can do, and that will allow us to have new opportunities to grow over time.
Got it. And one final one for me. As you, you know, talked about all your investments across, you. Bio production as well as manufacturing. Are there any key remaining gaps in the portfolio that you would like to plug either organically or inorganically.
So one of the things that we're doing all the time is is talking to our customers about what the future holds and that helps inform our strategy. And the fact that we've played, as Mark said, such a large role in mRNA was because we were working with those customers a decade ago, right. And we'll continue to understand the evolving science, and we will continue to make the investments required to position us for an amazing future.
Got it. Thank you.
You're welcome.
Our last question is from Matt Sykes of Goldman Sachs. Good morning, Matt. Hey,
Hey, good morning. Thanks for taking my questions and really appreciate you spending the time to do this today. I just have two quick questions. I'll mention both upfront. Just on the first one, you talked about your customer base in pharma and biotech, just given the level of funding in the small and emerging biotech sector.
Could you talk about how your customer mix of large pharma versus Small emerging has changed and maybe what portion of your growth in this end market has come from that small emerging biotech customers. And then just my second question just on inflation. Can you just talk a little bit about what you're seeing in your own supply chain? And do you think your mitigation efforts and pricing strategies can continue to offset these pressures of inflation continues to go up. Thank you very much.
So Mark, do you want to talk a little bit about the pharma and biotech mix and how that's evolved over time? And then I'll talk about inflation.
Sure. Thanks. So in terms of the small and emerging biotech, they're becoming incredibly important just for the amount of innovation going on there. So we've really adopted to make sure as they come out of the academic environment that we're there first with them. We've often helped them in the academic environment.
So they really are an important driver of growth for us and help them quickly progress through either as they scale up or ultimately maybe become part of a bigger biopharma. So it is a meaningful part of our growth And we see that as an early innovation. So we focused on making sure we're nimble and able to really work with them at speed as they move quickly through their stages.
When I think about inflation and our ability to manage that, obviously, the benefits of our PPI business system to be able to drive productivity, to help our suppliers in terms of navigating whatever inflationary pressures that they have so that we Can be cost effective. It's a proven methodology. We'll continue to drive that productivity as well as, you know, in some of these areas where there is cost inflation that is well understood across the economy. We'll be able to pass that on to our customers. So we expect that We'll be able to effectively manage this and that's incorporated into the margin expectations that you see in the shorter term and longer term model.
So thank you. Thank you for participating today. Thank you for your questions. We're very excited for the future, and we look forward to continually updating you on our progress and The next milestone will be after our Q3 call. Thank you, everyone.