Okay. We're going to go ahead and kick it off. I'm Tycho Peterson from the Life Science team. It's my pleasure to have Udit from Waters with us today. Welcome, Udit. Maybe we can just start with a quick look back on 1Q. Obviously, very strong growth in the legacy Waters business. We'll start there. Up double digits, clearly humming along in the replacement cycle. Just talk about some of the gives and takes, particularly on the biopharma side you saw in the quarter.
Look, I mean, firstly, thank you for having me, Tycho. It's great to be here. Fantastic quarter. Double-digit growth. We saw that this is a legacy business that you're talking about. Instruments still high single digits. LC-MS replacement cycle going very strong. New products doing extremely well, Alliance iS, Xevo TQ Absolute, XR, MRT. Nice contributions from new products across the board. The idiosyncratic growth drivers, the GLP-1 testing, PFAS testing, India generics, all contributing nicely. On the recurring side, chemistry had another terrific quarter, even with the extra days, which it was about 13% growth. Service grew 12%. Even if you adjust for the extra days, it's high single-digit growth. Really fantastic quarter. I think you asked about the end markets, especially pharma. Pharma was a standout. Mid-teens growth, high single-digit growth in U.S. and Europe, driven by large pharma replacing and new products.
India generics doing just as well as it has over the last. We're very used to high teens growth, in India, and that didn't disappoint. China was the standout. In pharma, China grew over 50%. This is driven by the local biotech industry fueling the growth of CDMOs and the local pharma companies. So fantastic growth. Nothing to complain about. We had virtually something for everyone in this particular quarter across the board. Equally in the guidance itself, we said, "Look, we're going to use the opportunity." We beat the guidance by about $60-ish million on the top line. The EPS was nice, actually almost 20% growth.
There, too, we had room, but we just said, "Look, let's just de-risk the second half of the year, and use this opportunity to create a bit even more prudence, in what we see as the latter half of the year." Feel very good about where we sit. Just as a last comment on where we are now, you'll remember at the Analyst Day about a year and a half ago, we had laid out an algorithm. We had said, "Look, if the industry grows between 4% and 6%, on top, you add about 100 basis points of additional price versus last several years. Take 100 basis points away from China being slower than it has been in the past for the industry and for us. Add the idiosyncratic growth drivers, 170 basis points.
We upped that to 200 basis points in the recent times. We said, "Look, as long as the replacement cycle goes on, you should expect us to grow high single digits to high single digit plus." That's been sort of the ZIP code we've been in for the last year and a half. High single digit, high single digit plus, and this time double-digit growth. Feel good about what we set in motion. The operational inertia, the operational sort of tactics that need to get in place after you lay out concepts is out of the system. We're executing that plan, I think, really well.
Anything you're willing to say on pharma strength post 2022? We've heard some of the peers, April, May actually has picked up for a lot of the customers.
We can't. Maybe next year. Good try.
Let's double-click on China then. Over 50% growth. It's more CDMO biotech right now than generic, right? Maybe just talk about those end markets and then obviously we can talk on stimulus and academics.
I think, start with biotech. Roughly one in every three molecules that are in-licensed now are out of China, into the rest of the world. Roughly every one in three molecules that is in-licensed in the biotech industry comes from China, right? This is something that's been built up over a long period of time. This has not happened overnight. The Chinese government brought in a lot of talent from the U.S. and Europe into the academic institutions. They have now been funded to start their own biotech companies. The Chinese FDA has made preclinical trials and early-stage clinical trials much simpler to run in China itself. There are structural advantages of starting work for biotechs in China. That is, of course, now supported by world-class CDMOs like WuXi.
Equally, which is most important in my view, is you're starting to see the rise of large pharma companies akin to Pfizer and Merck with discovery-led and research-led institutions in China itself, right? Hengrui is starting to build that, and a couple of other pharma companies are building their version of Pfizer, GSK, et cetera, in China. This is not a one-time impact. Don't expect pharma to grow over 50% every year in China for us or every quarter in China for us. It is now a secular trend, and we intend to take advantage of it. I want to just share one example with you. We talk about onshoring and we talk about localization of portfolios and local manufacturing. Equally important is the technology development that is taking place in China now, right?
We saw one of our large CDMOs take our high-resolution mass spec, and this is a first globally. Our Xevo MRT, use it for a GLP-1 in quality control. This has never happened before. We've been trying with BioAccord for the last three to four years. We have a compliance software. It is an enterprise-level software. It serves all the needs to enter QC. It has entered QC for some large pharma companies in the West, but at a modest level. This is a first for a high-resolution mass spec, like Xevo MRT to enter into QC. What does that mean? That means, and that's for a GLP-1, for one of the large GLP-1 manufacturers globally. What does that mean? That means that once these high-resolution mass specs enter QC for impurity testing in China, the same thing will start to happen in the rest of the world.
I'm super excited about that, right? It's not a laggard, it's not a localization of portfolio, it is a leader. China is a leader for us now in pharma.
I think you were saying last night that WuXi kind of implements the same protocol at every facility around the world.
Yes. In fact, there was a complaint from our China head who said, "I'm winning all this business with WuXi, but they're doing their production in Singapore, so the APAC region benefits, and I should get $4 million or $5 million of credit." I said, "Okay. That all is fine." Jokes aside, it's fantastic to work with such engineers who are actually pushing our teams to do things faster. I mean, Waters speed is something that we take pride in. Even we are being pushed in China, and it's fantastic. It's really, really good. It's also true, not just in that space, for one of the large food testing companies. We've been forever trying to crack a global contract testing organization. One of our competitors has lion's share in it.
We've forever been trying to crack it, even with better instruments and better workflows, we've not been able to crack it. In China, we did. Right? Because there was a pull, and they're willing to give new technologies that are better a chance, and incumbency has some value, but not infinite value, and it's fantastic.
You talked about localizing workflows, manufacturing, you're doing it with flow, right? Streamlining export processes. Just talk a little bit about when that translates into orders and revenues as we think about tenders.
Here now you're referring to the bioscience business, right? Unlike our analytical solutions business, our analytical sciences business, which is legacy Waters, where we localize our full portfolio, and we're able to compete in local tenders for any customer for bioscience, we've been restricted from doing that, right? Because we haven't localized the portfolio. It's actually true for microbiology as well. For those businesses, for some reason, the portfolios were not localized even to the slightest degree. We approved that right when the deal closed, and we will start to see orders, actually sales come in in Q3 and Q4. You're going to say, "Well, how can you localize so fast?" Localization doesn't mean local production.
Localization means different pieces of the value chain have to be localized to be able to compete in local tenders with a promise that you localize more over time. We have a site in Suzhou. Sometimes that is a constraint if you don't have a site itself, which is ready to actually take these workflows. We've already tech transferred them. They're going through local approvals. As I said, we move at Waters speed, only second to China speed, so it's fantastic when the two things come together. In Q3, you should start to see orders from locally made flow cytometers, and next to follow will be locally made BACTEC FX instruments.
Maybe just rounding it out on China, how do you think about kind of normalized China growth once the export headwinds roll off?
Oof. It's a tough question, especially if you come off the back of an 18%, 20% growth quarter, right? We've still modeled mid-single digits in our guidance. To pass the red face test everywhere you look, especially where we're exposed and the choices we've made to be in pharma, to support the biotech industry, to support the academic institution, and to support microbiology, I see no reason why it shouldn't start to traverse towards high single digits by the time the year ends.
Maybe just stepping back and looking at BD, 12 came in better than expected. You obviously reset the numbers on the forecast call. Maybe just level set us now, it's been a few more months since the deal closed. As we think about what's under your control, where are you most excited, where are you seeing the most tangible benefits from some of the changes you're enacting? Is it commercial?
Yeah.
Operational?
Just take a step back, right? I mean, let's just sort of look at the full context, right? Whenever you look at a business, you want to look at the characteristics of the end market, you want to look at commercial execution, and then you want to look at innovation, right? I mean, those are the choices you make. From an end market perspective, Waters has always been focused on downstream regulated settings where volume is easy to understand. Pill count, number of infections, number of patients, that you can verify publicly, right? We are always looking at those sorts of segments, and we want to get stronger in those sorts of segments. For the last five, six years at incumbent Waters, we've basically been in that space.
We've executed well commercially, and then we've introduced new products to go from what used to be a low single-digit grower to a high single-digit to a double-digit grower. We are starting the same journey with the acquired businesses now, right? They are largely downstream, and they're in high volume regulated applications like microbiology, like clinical for flow cytometry. The only things that are missing are an intense focus on commercial execution, and then once you've done that, launching new products really well, right? Those are the two things we'll enact now. Now to answer your question specifically, I mean, think of the transformation plan and the integration in three phases. First is the 180-day plan. This is self-help. This was nowhere underwritten, but when you look at such a business, you say, "Okay, are you actually going to your customers often.
At Waters, what we found is we were going to customers two times more or twice as more as some of our BD colleagues were. We implemented a tracking mechanism in the U.S. in particular. Second, we said, "Okay, that's all well and good. How strong are your funnels?" Right? Is it just a conversation between two people or do you actually know if the lab head actually has funding and if they have approval for funding to buy the instrument that they're saying they're going to buy? The fidelity of the funnels allowed us to meet our forecast, for this particular quarter. After many quarters, these two businesses have met their forecast. That has to do with the robustness of the tracking of the funnels. Then we said, "Look, that is all well and good. Think about pricing.
Are you actually able to command pricing and what is your pricing mechanism and pricing control mechanism? It's one thing to have a high list price, it's another to have a high landed price. How are you controlling discounts? Waters has what are called deal desks. These are people who meet twice a week, who review hundreds of different deals over a month and approve them or modify them so that we can win versus competition, right? This is a discipline that's been there at Waters. It's being now implemented in bioscience and diagnostics. The second part of pricing was contract compliance. These are reagent rental businesses, where once you agree to a price-volume curve with a customer, the customer has to comply with the volume in order to get that price.
What we saw is close to 50% of the customers in the U.S. diagnostics business were not complying. They're buying lower volume, that's a double-digit million delinquency that we are now starting to recover. Right. This is again, self-help, right? Finally, when you talked about China already, we found that the business had not localized products in China, somehow our teams were handicapped versus competition. We wanted to remove that handicap. We have already done it, that handicap, once removed, will allow us to capture market share and capture the growth that we deserve to capture. That's just the 180-day plan. That I call setting the tone, right? That gets everybody to understand the culture that we're building. You talk about the synergies on the revenue side, right? There are tactical synergies.
These are ones you can feel and touch and you know that we've executed them in the last five years. This is increasing service attach, instrument replacement, e-commerce, launching new products, and we have three fantastic new products across the businesses. In fact, we had a press release this morning on our FX approval for microbiology in the U.S. as well. It's already approved in Europe and Japan. Very excited about the replacement opportunity, about the placement opportunity of that new product. A7 is a high-volume flow cytometer for routine applications that will be launched in the second half of the year. Thirdly, we've launched our HPV solution home collection kit. These are three massive launches. You're lucky to get one every three to four years. We're getting three all at the same time, so we have to launch them well.
This is for me, the second bucket, which is tactical synergies. Here and now, we can all see it. They're tangible. We've just done that over the last five years. Then there are the strategic synergies. Can you enter the industrial segment with microbiology? There's a market that's already ready. We have to modify our portfolio. We've already assigned a team to do it. Can you improve your bioseparations growth from double-digit growth to even higher by having access to antibodies? We have access to world-class antibody production, so we're going to do that. Can you take flow into QA/QC? We're starting to see benefits of cross-selling already, with mass specs into drug metabolism. This is in the reverse direction. Can you automate LC-MS? All of those are in motion, but from short to long, 180-day plan is already showing benefit.
The tactical synergies will start to show benefit now in Q2 and onwards, and the strategic synergies latter half of the year. It conceptually is very clear. The accountability is very clear. Now the question is how do you get the inertial friction out of the system so we can execute like incumbent Waters is executing.
Maybe, just diving in on, first of all, the announcement a couple of hours ago on FX side, you're pulling forward the timeline. Maybe just talk about how that came about.
Let's give credit where it's due. When I saw that and we said, "Look, we've accelerated the launches." I went to the R&D head in our diagnostics business and said, "Hey, how could Waters have accelerated the launch? The acceleration is longer than the time from the close to now." He said, "Look, as soon as we knew we were going to be acquired, and during integration planning, we sort of saw how you guys are operating. People said, 'Okay, we've got to get out of the gates fast.'" There is an acceleration, but I wouldn't say that it's happened under Waters management. It has happened under that team, which is exceptional, right? It goes to show with increased focus, with increased ambition, people want to do well. These are fantastic portfolios. As I mentioned, these are great end markets where we have privileged positions.
We have a bit of self-help to execute, and then we start to address the significant unmet needs that exist in these areas.
Let's just spend a minute specifically on microbiology, because I know that's been focused and a pressure point. You just had a good first quarter there, right? Up low double digits ex China. Just talk about where you're feeling better on microbiology in particular.
Again, we can go back to the framework I set up front. Just looking at the market itself, the end market. Volume grows on the high end of low single digits, say 3% . Our nearest competitor has been commanding pricing between 200 and 400 basis points. From 2019 to 2024, that end market grew 6.5%. Way faster than any diversified tools company, including Waters. Waters was one of the fastest, and we didn't come close to it. It is a fantastic end market. The unmet needs are very significant. For a sepsis patient, it takes roughly 18 hours from the time they enter a hospital to the time they are prescribed the right antibiotic. Every hour delay increases the mortality by 5%-10%. Roughly 300,000 people in the U.S. die of sepsis every year. Unmet needs are significant. Technology solutions need to be brought in.
There is need for self-help. It's a market that grows, but we've been underperforming in the market. In Q1, we got out of the gate strong. As I mentioned, 180-day plan starts to show impact. Microbiology as a whole grew for the full quarter, roughly 5%, for the sub-period, a bit faster than that. If you take out the China impact, it's even faster, right? China declined about 15%, so ex-China grew really rapidly. You already start to see momentum of just focusing on the business. That said, there are two or three, as I mentioned, self-help topics. One, we had a supply challenge with our BACTEC bottles. We are still only about 80%- 85% of the utilization prior to the supply challenge. There is zero reason why we shouldn't be 100%. In fact, Brazil is at 110%.
The creative folks have actually used that supply issue to increase penetration. Others have said, "You know what? Maybe I can't supply." We're pushing the team to get back to 100 or 100 +. There's an opportunity there as well. Second, we have about 12,000 or so instruments that are out there, the FX instruments, and there is a significant replacement opportunity. That are basically instruments that are over five years old, and there are roughly 4,000-5,000 that are over 10 years old. We have just launched the new version of it, FX, which is the most automated platform in the industry. It is a closed system. It is able to use the highest number of bottles per unit in an incubator. A new product's been introduced exactly at the time when the replacement cycle is picking up.
The self-help pieces will allow us to get I don't want to set the milestones too high, but there is no reason why we shouldn't be growing faster than our competitor. We've trailed them for many, many years. Our consumption on the consumables is lower. Our instruments are aged, so we should be playing catch up like we did with Waters in 2021 and 2022. We grew faster than the industry because we had catch up. We have catch up here for the next year and a half, where microbiology should grow faster than the industry. There's only one other meaningful competitor in the space. We should be commanding better pricing. You can address the significant unmet needs. It's a fantastic end market. There's a lot of self-help to be executed there.
Maybe a similar question on the flow side. Research clinical group, 7% in the first quarter. Just unpack what you're seeing by end market, consumables versus instruments, and where do we sit on revenue synergies and starting to push it into QC bioanalytical characterization?
Sure. Let's start with the overall business. Half of it is clinical customers, half of it is what we call research and pharma customers. On the clinical side, the reagents business itself grew 6% for the full quarter, and not just for the sub-period. Sub-period, it was much faster. Right? I just take the full quarter, and for the full quarter, it was 6%. That business in itself, our highest margin business across the new Waters, is our clinical reagents business from Bioscience. That's been growing slower than some of our other businesses. Their task is to grow that business faster. As I mentioned earlier, there is an issue with contract compliance.
We just reviewed Europe two days ago, where the European team has done the same analysis we did with the clinical business in the U.S., and they've also found delinquency in contract compliance on reagent rentals. They're going back and trying to figure out the value propositions that we need to offer customers to increase compliance. You should see that business growing faster. Fantastic business. The second is the research reagents business, which is also very good business. There's another competitor here who's now also been public about how they focus on quality and orders and then finally on pricing. The market structure there is also very good. There's only one other meaningful competitor in that space. Our challenge has not been the quality of our products. Our challenge has been on delivery. There, we're doing two things.
One, we're basically improving the front end, which is what we did with Waters, to improve the e-commerce platform. There, we've hired about 100 new people in our global capability center in Bangalore to expedite that process. Finally, the third piece is delivery, which you can't fix overnight. Usually, customers expect between two hours and 24 hours. If you're in China, they expect their antibodies in two hours. If you're outside of China, they'll accept 24 hours delivery time for research antibodies. To get to that point, you need to have your distribution network be global. You can't do that overnight. We're going to partner with distributors who have global infrastructures, have them hold inventory for us, then partner with them to improve the demand and delivery. That's the reagent side, really clear plans to expedite growth.
On the instrument side, the A7 product, as I mentioned earlier, it's a high volume use flow cytometer, a spectral flow cytometer that's being launched in the second half of the year, actually June, July timeframe. Saito will talk about it more next week. Really excited about that. On all three fronts, we see the base business growing faster beyond the 180-day plan as well. Now you asked about synergies. On flow in QA/QC or other synergies with bioscience. The bioscience business has already helped us penetrate drug metabolism accounts. We saw roughly $5 million of upside for our analytical business coming from bioscience accounts. Now, equally on the other side, taking flow cytometry into QA/QC, first it starts with process development, where our analytical business has a much larger presence, and we're starting to see the seeds of that being sown.
For it to enter QC, we will have to have flow cytometry be compatible with Empower. That's going to take a little bit longer, one to two years of development time, and then you'll start to see the penetration, like we did with light scattering. I think that's how I would break it up.
You touched on pricing a couple of times. Just maybe talk a little bit about when we could really start to see this show up in the P&L. I know you gave a little bit of some guidance.
We've incorporated 50 basis points in the guide. You should see something better than that. Over the long term, with Waters, had roughly 200 basis points of pricing over the last few years. At the Investor Day, we said, look, 100 basis points above the 50 basis points that we've seen historically. For the new businesses also, you should have the same expectation. 50 basis points is what's been there historically, which is what is in the guide. There's no reason why in a year and a half from now, you shouldn't be seeing 150 basis points or 200 basis points, which is what we said also in the investor call.
Just thinking about chemistry on the base business, talk about what you're seeing in durability of other historical trends there, call it 8%-9% versus traditional 7%. I think given pricing's sort of unchanged at 5%, it suggests 1%-2% from new markets, new products.
I think you nailed it. The simplest way to first answer your question, the simplest way to think about it is historically, chemistry has grown 7% with our bioseparations growth and our products there. You should expect 150 - 200 basis points of faster growth just coming from those. That's the simplest way to think about it, assuming similar pricing. You take a step back, I think it's instructive to look at the journey. About five-ish years ago, we decided that we're going to spend bulk of R&D spend in chemistry on bioseparations. Over 70% of R&D spend went towards bioseparations. Step by step, we started to build the portfolio, and last year alone, we launched 12 new products on the back of our MaxPeak Premier column, right?
It takes four, five years to sort of build these portfolios and start to see the benefit. With MaxPeak, the insight was very simple. Large biologics basically get stuck to surfaces. We said, how do you build an inert surface without having it leach off? We built that with MaxPeak, on top of it, we started to sort of come up with better particles, better surface chemistry, that will be compatible with the biology of these complex molecules. Our nearest competitor launched their inert column five years later. We had the market to ourselves for roughly five. Think of it this way, right?
Each of these new modalities now that are being separated with our columns has that four to five-year window, and then once they get specced in, they are sort of for the long term, going to grow like bioprocessing does, high single-digit, double-digit. We are now in a zone where you will see us grow way faster in one quarter, a little bit slower because we're speccing in into discovery a lot of our columns. You'll see a spike, and then you might see a bit of a slowdown, but over the steady state, you should see a high single-digit growth. As you think of the balance of the year, we've said, look, it's going to be mid-single digits.
Q2 in particular, remember we had a $10 million pull forward in China in Q2 last year. That sort of is a headwind if one has to surmount. That's why we said, chemistry, think of it as a 4%-ish grower in Q2, maybe a bit higher, maybe a bit lower. Add the $10 million, that's another 6% of growth. That also gets you into the high single-digit, double-digit domain, right? No matter how you look at it, we're traversing in at least a high single-digit domain for a while in chemistry.
Just part of the excitement around the deal is getting access to the antibody library. What should we think about stranded products, projects on the BD side, especially Shake loose?
Two parts to that answer. First, existing antibodies. We looked at the existing library of antibodies, and out of the 12 programs that were stranded, eight have been kicked off already. We found antibodies that existed that the team's already manufacturing, that we've substituted external vendors for our internal capabilities already. It takes, give or take, 6 - 12 months to basically do the conjugation, do the experiments, work with a customer to start to see if they're interested in embedding that into their workflows. 6 -1 2 months from the time you start, you start to see first impact. You've probably launched the product in two years, right? That's sort of the time frame for these eight antibodies.
There are the additional four that we said we need to build, sort of develop those antibodies internally, and we're doing something slightly more than that now. We're now looking at our global infrastructure and saying, "Hey, given that we produce antibodies, should we not think about expanding our library of antibodies and supply them for use in other areas as well?" You can already see a hint towards building an antibody business. Why not, right? There is a plan that's ready to build an antibody facility in Singapore. We sort of nixed it and we said, "No, let's look at our internal capabilities in every geography, and can we build a brownfield approach?" We're examining that. There are two-pronged approach.
One, support our bioseparations business, and two, can we expand our antibody production capabilities to have a library of antibodies available for our customers and not just be a producer of flow antibodies.
Great. Just got a few seconds left. I guess maybe just coming out of ASMS, any message you want to take away? Obviously, new introduction here, maybe slowly moving into kind of high res.
I think incredibly proud of the team that's leading mass spec. It's gone from a team that was obsessed with high-resolution mass spec six years ago to one that builds strength in high volume tandem quads with TQ Absolute, TQ Absolute XR. Equally have skunkworks projects behind the scenes to improve our high-resolution offering with the Xevo MRT and our benchtop Xevo MRT, which is the fastest, high-resolution instrument on benchtop available today in the industry. Equally improving Cyclic, and this is where your question's going to start moving into proteomics. Make no mistake, that's an area that's attractive. We just felt five, six years ago, we were in no position to build while we were losing in our home base, which was high volume mass spec. We're winning in our home base now. We're attacking drug metabolism as well.
We feel we have a right to win there. Yes, the answer to your question is yes. We are interested in proteomics. We are working on ways of making a difference in this stadium.
Great