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PerkinElmer Inc (NYSE:PKI)
Q4 2020 Earnings Call
Feb 2, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. And welcome to PerkinElmer Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session [Operator Instructions]

I'll now hand the conference over to your speaker today, Bryan Kipp, Vice President of Investor Relations.

Bryan Kipp -- Vice President of Investor Relations

Thank you, operator. Good afternoon, and welcome to the PerkinElmer fourth quarter and full year 2020 earnings conference call. With me on the call today are Prahlad Singh, President and Chief Executive Officer; and Jamey Mock, Senior Vice President and Chief Financial Officer. If you have not received a copy of our earnings press release, you may get one from the Investors section of our website at www.PerkinElmer.com. Please note this call is being webcast live and will be archived on our website until February 16, 2021.

Before we begin, we need to remind everyone of the safe harbor statements that we have outlined in our earnings press release issued earlier this afternoon and also those in our SEC filings. Statements or comments made on this call may be forward-looking statements, which may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested by any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. Any forward-looking statements made today represent our views as of only today. We disclaim any obligation to update forward-looking statements in the future even for our estimates change, so you should not rely on any of today's forward-looking statements as representing our views as of any other date after today.

During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent, we use non-GAAP financial measures during this call that are not reconciled to GAAP in that attachment, we will provide reconciliations promptly.

I am now pleased to introduce the President and Chief Executive Officer of PerkinElmer, Prahlad Singh. Prahlad?

Prahlad Singh -- President & Chief Executive Officer

Thank you, Brian and good afternoon everyone. A year ago, I started my prepared remarks talking about how 2019 was a seminal year for PerkinElmer. And I had no doubt that the positive changes we had completed would become increasingly apparent to external stakeholders in the quarters and years ahead. Looking back now, it is hard to believe how much has changed in such a short period of time. From where we stand today, looking back on 2020, we are a more collaborative and cohesive organization. We've reduced red tape promoted cross functional collaboration and struck a chord with employees that has resulted in our launching of several breakthrough innovations. The energy and purpose that pervaded throughout 2020 was inspirational. Our collective mission to improve lives propelled us as we rallied together to respond to the call to action to help, all while making sure that we did not lose sight of our four guiding principles that we highlighted at the onset of the pandemic.

Keeping our employees and companies' safe, utilizing our expansive capabilities to join in the fight against COVID-19, serving our customers with excellence during this difficult period and emerging from this crisis a stronger company. I could spend the next hour highlighting the countless examples of employees who went above and beyond in 2020. However, instead, I will take a moment to thank them and their families personally. Many did not receive the spotlight they duly deserved. But their tremendous sacrifices did not go unnoticed by us nor our customers. They each personify our mission. And I could not be prouder to be working alongside them and the rest of our 14,000 colleagues on a daily basis. Their efforts in 2020 embolden PerkinElmer's place in the world. PerkinElmer has been and continues to be a fundamental player in the fight against the global COVID-19 pandemic. However, as I've said before, we do what we do, because we are passionate about helping people, it's personal. Our COVID-19 response is just one example of the power of our company. We are a multifaceted and multi-talented organization. As we look ahead, one thing is for certain, we will emerge as a strong organization. We are a leading global diagnostics plan. We are an exemplary global citizen, a thought leader, a strategic partner, which does what's right, and puts the worthy costs of achieving breakthroughs in healthcare and science first.

Most of all, we have learned a lot over the past year, honed our collective skills and developed capabilities that we as an organization didn't have a year ago. That's why even when the pandemic subsides, and we are operating in the new normal, things will never be the same. We have honed the seat at the table by clearly demonstrating we are leaders in the fight for making the world better and safer. And I truly hope that that is what you take away from today's call. In terms of the fourth quarter and full year financials, Jamey will detail our results in a few minutes. But at a high level, I'm very proud of our performance throughout 2020. Fourth quarter results far surpassed the guidance we communicated on the third quarter earnings call. We delivered the best quarter of organic growth and profitability since the creation of the modern-day PerkinElmer in 1999. And from a cash standpoint, we generated more cash in the quarter, then all of 2019.

For the full year, the team delivered 29% organic growth, including over a $1 billion in COVID revenue, adjusted operating margin expansion of over 1100 basis points, greater than 100% adjusted EPS growth and in excess of 800 million in free cash flow generation. That being said, while the headline financial performance is certainly impressive, it is important to also not lose sight of the fact that we aided more than 1000 new diagnostics customers in their efforts to combat the pandemic. We shipped more than 25 million COVID-19 PCR tests, expanded our chemagic installed base three times to over 1600 instruments worldwide and launched best-in-class solutions, such as our explorer workstation, which boasts unparalleled sample throughput and setup flexibility. We also invested back into the company. We spent an incremental $25 million in people and digital capabilities and invested more than $200 million in R&D to ensure that we continue to build a robust pipeline of new products across a full suite of technologies.

Inorganically we are declining approximately $800 million in capital, adding new and exciting assets to the PerkinElmer family including horizon discovery, which uniquely processions as to propel cell and gene research forward through our combined screening and genomic solution and also Oxford Immunotec. And we gave back, as a thank you for their incredible efforts, we gave a yearend organization wide bonus to our employees and we seeded PerkinElmer Foundation to serve as a charitable matching vehicle for future donations that are near and dear to our employees' hearts.

While the fourth quarter and full year financial results are certainly impressive. We have many accomplishments beyond the headline financial numbers to be proud of. Most of all, we have always and will continue to do what is right and lead with science. This is what our customers trust us to do. And this is what we expect of ourselves. As we transition to 2021, you can expect that we will continue to lead with science and deliver on our four strategic priorities. While executing against the value creation framework we outlined during our December Virtual Life Sciences deep dive, as well as during our recent presentation at the JP Morgan Healthcare Conference in January.

In terms of our strategic priorities, our goals remain the same in 2021 on the customer front. We aim to go above and beyond for them while owning their trust as a true strategic partner. I mentioned earlier that we had made significant headway in enhancing the customer experience last year, and we seek to further build on that momentum this year. To that end, we launched our new global commercial function last month, which will support all three regions in a strategic and agile way.

Miriame Victor was recently appointed Chief Commercial Officer to manage our global commercial organization. She has done a phenomenal job as the General Manager of our EMEA region over the past two years. By centralizing our commercial efforts, we hope to further codify our go to market strategy across all segments and geographies, as well as promote collaboration and democratize best practices across the organization. On talent and culture, we plan to accelerate our employee engagement and brand advocacy efforts in 2021.

While we are proud to have one of the lowest voluntary turnover rates in the industry, there is certainly more we can do to improve our most valuable resource, our people. In 2021, we plan to elicit feedback on our recent efforts through employee satisfaction surveys, to ensure that we have the right programs in place to be certain that our employees are happy and fulfilled professionally.

On the transformational innovation front, while 2020 was an extremely successful year, in terms of new product development, there were a lot of behind the scenes learning as well as we push the R&D organization harder than ever to respond to the rapidly evolving needs of our customers'. In 2021, our aim is to build on the NPI introduction successes of 2020, while also democratizing prior learning's and institutionalizing process improvements, so that we can continue to optimize our R&D engine for the years ahead. Within operational excellence, as we continue to scale our company, every function increasingly plays a role in making PerkinElmer more efficient and agile. Operational excellence is a muscle that all PerkinElmer employees need to hone, whether it be R&D, manufacturing, operations or cash collection, we are constantly looking across the organization at ways to improve our operational rigor and given we're in the early innings of this effort, there's lots we can do.

In 2021, expect that we will continue to march ahead focusing heavily on quality, code to delivery and cash collection. And from the perspective of leading with science, we will continue in 2021 to listen to our customers, keenly track scientific advancements and challenge our teams to think about ways we can uniquely tackle the scientific challenges of today and tomorrow. For example, think back to a year ago, there wasn't as much focus on the diagnostic nuances between humoral and cell mediated immune response. In a post COVID world, we are firm believers that there will be an increased research and clinical focus on developing diagnostics for infectious diseases, autoimmune disorders or cancer that look at the patient's humoral and cell mediated response to disease. EUROIMMUN recognized the importance early on in 2020 and invested in their own T-cell assays. However, it bit as it became more apparent to us that this is where science is likely headed. We as an organization proactively coated Oxford Immunotec to enhance our expertise and accelerate our capabilities on this front. This is just one example. But I think it is an informative one, in that it touches on both our focus to be at the tip of the spear of science, as well as agility in being able to respond quickly to evolving market dynamics as we see them play out.

Before I make some closing comments, I wanted to thank and congratulate Bryan. As you know, one of our strategic priorities is talent and culture. Bryan Kipp is an exceptional talent that joined PerkinElmer two years ago, and I'm proud of the work he has done in reshaping our Investor Relations function over this time. He recently accepted a new internal role that will result in him transitioning out of his current Investor Relations responsibilities. I could not be more excited for him, and I have no doubt he will do a phenomenal job in his next chapter at PerkinElmer.

In closing, I'll end where I started. It is astounding to think about PerkinElmer's progress over the past year. We truly are a different organization, though our guiding mission remains our North Star, innovating for a healthier world. We have earned the right to lead in key areas with the greatest impact on health and science, and have built the internal momentum and esteem with our customers and partners to continue to do so. I'm inspired and humbled by our team. And I couldn't be more excited for the opportunities that lie ahead.

I'll now turn the call over to Jamey.

Jamey Mock -- Senior Vice President & Chief Financial Officer

Thanks, Prahlad, and good evening, everyone. To start I echo Prahlad's remarks and as I've reiterated throughout 2020, I could not be prouder of our team in how they collectively responded to address the needs of our customers and society during these unprecedented times. I have no doubt our shared learning's position the organization well as we aim to tackle the challenges of tomorrow.

Before turning to the financial results, I want to remind everyone that our fourth quarter earnings call presentation has been posted on the investor section of our website under financial information. I will begin my prepared remarks by highlighting the fourth quarter. Then I'll provide some additional color on our served end markets and financial metrics. And I will end with a quick look back on our 2020 results and our 2021 guidance. At a high level we are extremely pleased with our record fourth quarter and full year results. The organization executed remarkably well throughout 2020 despite an extremely difficult macroeconomic backdrop. But as we look ahead to continued sequential improvement in our customer engagement and business activity during the fourth quarter positions as well as we turn the fiscal calendar to 2021.

During the fourth quarter adjusted revenue grew 68% to $1.36 billion, compared to last year, and included a 3% foreign exchange and negligible acquisition tailwind. Organic revenue grew 65%, two percentage points better than what we previously communicated. Overall, COVID-related products and services contributed $549 million in the quarter propelled primarily by our PCR tests and RNA extraction solutions, as well as our turnkey Lab-In-A-Lab testing solutions in the state of California and the United Kingdom. In total excluding the impact of our labs, our PCR and RNA extraction products contributed over $300 million of COVID revenue during the fourth quarter.

By business diagnostics representing 63% of total sales increased 172% organically. Strength in our immunodiagnostics and applied genomics businesses more than offset the improving, but ongoing modest declines in our reproductive health franchise. Discovery and analytical solutions representing 37% of total sales declined 2% organically as strength in our life science business was offset by more muted demand conditions in food and applied end markets.

On a geographic basis, Americas grew strong double digits. Europe grew triple digits, and Asia Pacific grew low single digits. China remained in negative territory, though improved sequentially. Early signs point to a healthy rebound in our China business as we advance into 2021. Operationally, we are extremely pleased with our performance this quarter. Adjusted operating margins expanded approximately 1800 basis points to 42% led by volume leverage, business mix and productivity programs. Adjusted earnings per share of $3.96 in the fourth quarter nearly tripled versus the fourth quarter of 2019.

Looking further into key drivers within our segments, let's start with our Diagnostics business. As mentioned in my earlier remarks, organic revenue increased 172% as robust growth in Europe and the Americas drove the momentum. Our Applied Genomics business led the way posting over 420% growth on broad based momentum across all geographies with strength in our nucleic acid extraction, liquid handling and sample prep product lines. Nucleic acid extraction and automated liquid handling grew over 12 times and seven times respectively, versus the fourth quarter of 2019.

As Prahlad recently mentioned, we installed over 1000 chemagic systems and 600 DNS liquid handlers in 2020. Both platforms have gained share and position our Applied Genomics business well as we eventually transitioned to a post-COVID world. Meanwhile, immunodiagnostics growth increased over 250%, with EUROIMMUN growing over 20%. Demand for our portfolio of RT-PCR assays remained particularly strong across the globe, and serology demand was consistent on a sequential basis. Reproductive health declined low single digits organically driven by lower newborn and prenatal testing in Asia Pacific in Europe. Americas newborn increased mid-single digits, while Europe and Asia Pacific declined high single and double digits respectively. Birth rate pressures globally remain a headwind. However, early signs point to improved underlying demand trends.

Turning to Discovery & Analytical solutions, organic revenue declined 2% in the fourth quarter versus the same period last year. By end market, we experienced mid-single digit organic revenue growth and life science. Pharma biotech was up mid-single digits driven by strength in enterprise up double digits, and discovery up high single digits. Academic and government increased double digits driven by nearly 20% growth in our discovery franchise. Applied markets decline approximately 10%, with Americas down over 20%. Normalizing for the tough cannabis comparison in the quarter, applied declined mid-single digits, which we think is a more useful data point when evaluating the underlying demand trend across our applied franchise.

Food declined over 20% in the quarter. However, excluding cannabis food declined 12% with dynamics consistent across all three major geographic regions, making solace in bio all improved sequentially, which is an encouraging sign that food safety testing momentum is improving across the globe. Meanwhile, industrial and environmental safety declined mid-single digits, continuing the trend of improved sequential momentum since demand trough during the second quarter. Another positive sign for the applied franchise as we look ahead is that our yearend applied backlog increased double digits year-over-year. Shifting to below the line items, adjusted net interest and other expense for the fourth quarter was approximately $11 million and our adjusted tax rate was 20%.

Turning to the balance sheet, we finished the quarter with approximately $2 billion of debt and $400 million of cash. Adjusted free cash flow was $471 million in the quarter, which resulted in an adjusted free cash flow conversion rate of 105%. Finally, we exited the quarter with a net debt to adjusted EBITDA ratio of approximately 1.2 times down over a turn and a half since the beginning of the year.

Closing the books on 2020, we are extremely pleased with our overall performance including 29% organic growth, 102% adjusted earnings-per-share growth and 159% adjusted free cash flow growth, all compared to 2019. Adjusted free cash flow conversion was 89%, up from 70% the prior year. The DSO reduction has been a function of process improvements, as well as improve monthly linearity in terms due to COVID demand. We remain encouraged by our free cash flow progress and are confident that we are well positioned to deliver consistent adjusted free cash flow conversion of at least 85% for the foreseeable future.

Turning the guidance, while the pandemic continues to create uncertainty, we thought it would be helpful to provide a baseline for how we are planning our business in 2021. In total we anticipate revenue of at least $4.08 billion. Embedded in this guidance, we assume COVID revenues will be at least flat with 2020. And we expect underlying dynamics to improve for our non-COVID portfolio as we progress through the year, translating the full year non-COVID organic growth of approximately 5% to 7%. These assumptions do not account for any incremental lockdowns and/or any COVID related disruptions, as well as any potential catch ups related to pent up demand. Additionally, we are anticipating 2% benefit from both foreign exchange and acquisitions for the full year. In total, this baseline implies an organic growth range of 3% to 5%. And on the bottom line, we anticipate adjusted earnings per share of at least $8.50, which assumes approximately $40 million in adjusted interest and other expenses, a tax rate of 20% to 21% and our average diluted share count to be in the range of 112 million to 113 million.

For the first quarter, we are forecasting reported revenue of approximately $1.19 billion, representing 77% organic revenue growth and including a 3% benefit from foreign exchange and 3% from acquisitions. Embedded in this guidance is $500 million of COVID related revenue and organic growth of 1% to 3% for our non-COVID product lines. There are two additional factors to keep in mind for top line modeling purposes. First, the extra week during 2020 fell during the first quarter. As a reminder, we estimated that the extra week contributed $11 million of revenue. So that headwind is embedded in our 1% to 3% non-COVID growth guidance. And second, we generated approximately $12 million in COVID revenue in 1Q '20, so one needs to adjust for that amount in the prior year baseline when forecasting the incremental dollar growth for the non-COVID portfolio. In terms of adjusted earnings per share guidance for the quarter we are forecasting at least $3, which assumes approximately $11 million of interest and other expenses, a 22% tax rate and a diluted share count of 112 million to 113 million. All of this is detailed in the second to last page of our fourth quarter earnings presentation.

In closing 2020 was one of the most important years in PerkinElmer's long and storied history. I have no doubt we are better positioned as an organization exiting 2020. We are excited for what is ahead, how we will better serve our customers and perform for all of our stakeholders.

Before I turn it over to the operator, I also want to thank Bryan for all of his work leading and guiding our Investor Relations efforts over the past two years. He was instrumental in our strategic evolution and a staunch proponent of increased transparency for all of our stakeholders. I'm excited for him as he transitions to a new role with us in the coming weeks. And I'm glad he remains a part of the PerkinElmer family.

Operator, at this time we would like to open the call to questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Vijay Kumar with Evercore ISI. Your question, please.

Vijay Kumar -- Evercore ISI -- Analyst

Hey, guys, congrats on the nice prints here. And thanks for taking my question. I'll limit myself to one question and Bryan I want to congratulate you on your internal promotion, all the best to you. I guess if I could just maybe ask one on the guidance here, the COVID diagnostics at least flat given that you guys are doing 500 in Q1, so I'm curious, what the UK and California contracts -- does it make sense for pretty steep drop off from Q1 levels? And when you look at the base business, I think the 5% to 7% core, but correct me if I'm wrong, your core, the comp in 2020 was minus 7%. So that seems like a pretty easy comp. So maybe talk about the underlying in the COVID assumptions that I put to the guide.

Jamey Mock -- Senior Vice President & Chief Financial Officer

Thanks Vijay. There's a few questions in there and we're excited for Bryan as well. So I'll start with COVID. As it pertains to the guide, obviously, we said at least flat year-over-year and I'd say predicting the course of COVID has not been easy, nor do we anticipate it to be easy over the next 12 months. There are certainly some variables that could make it more than this. Let me talk about it in a couple ways. One is the sequence through the year, which gets to your question about $500 million in the first quarter, and then the labs versus kind of the rest of COVID revenue piece. So in terms of the sequence, obviously, we have much better visibility, certainly to the first quarter and the first half. And our assumption in this guidance is that the vaccine kicks in and that the second half's revenue and testing come down substantially. And you can see that by evidence that almost 50% of the revenue is here in the first quarter. So we feel like that's a conservative assumption, but one that we are confident in.

As it pertains to the split between core versus labs in 2020, core made up approximately 80% of the revenue. And we're predicting that that'll make up approximately 60% of the revenue. And conversely, the labs, which made up about 20% of the revenue in 2020, will step up and be a greater contributor in 2021, to be about 40%. So I think we're assuming that starting in the first quarter here, we're expecting the testing levels on the core to come back down and the level of instruments that we sell, et cetera, to kind of match what we saw probably in the third quarter. And then as it pertains to the labs, we've got a couple variables at play. First is in the UK, our contract only is valid through the end of March. So we're not yet sure whether it'll be extended beyond March, we haven't been told yet. We're obviously talking to them about that now. So this guidance assumes that the UK finishes at the end of the first quarter, and there is no revenue assumed in the end in the second quarter and beyond.

And then California, as you've seen is a slow and steady ramp. So it's public information. We've ramped from almost no testing at the beginning of November. And now we're probably about 20,000 tests per week. But there's numerous sites throughout the state of California that they're trying to bring into the program. And so -- but those are slow and steady. So we expect California to ramp up here, but it's not nearly as fast as we think. And so therefore, we've taken a pretty conservative assumption in the first half here as well, and then it tailors back down in the second half as well. So overall, a lot of variables in play Vijay. We're trying to set a floor here that says we think we can be at least flat. It's very much front end loaded here. And there's certainly some potential for upside here. And our supply chain can certainly deal with it as we've done in 2020.

Well, non-COVID. So on the non-COVID side, the first quarter; I think the comp is a minus 3%, not a minus 7%. The rest of China was the one that was impacted the most. I think China was down over 30% in the first quarter last year, the rest of Europe and Americas was quite strong in the first quarter, which pended to down 33%. So if you look at our 1% to 3% guidance here in the first quarter that embeds the extra week, which is the equivalent of probably two percentage points, so it's more like a 3% to 5% Guide. And we've seen a slow and steady uptick here. So second quarter of last year was where we troughed, we hit I think minus 14% on the quarter book, third quarter, we hit minus 6%. This past quarter, we hit minus 3%, with a couple of difficult comps in there. So we continue to see this trend up. As it pertains to the five to seven overall for the year. Obviously, we'll probably see the largest growth from an organic growth rate perspective in the second quarter due to the comp and then it'll start to normalize in the back half of the year.

Vijay Kumar -- Evercore ISI -- Analyst

Thanks, guys.

Jamey Mock -- Senior Vice President & Chief Financial Officer

Thanks, Vijay.

Operator

Thank you. Our next question comes from Derik DeBruin with Bank of America. Your question, please.

Derik DeBruin -- Bank of America -- Analyst

Hi, good afternoon.

Jamey Mock -- Senior Vice President & Chief Financial Officer

Hey, Derik.

Derik DeBruin -- Bank of America -- Analyst

Hey. So I want to ask on the margin progression, so how should we think about the decremental on the operating margin for 2021? And I know that it's at the at Tycho's conference, you put out some targets for the 2023 outlook. So I'm just curious and sort of like, can you sort of talk about the margin progressing going forward? And they are -- and what the impact is of the recent acquisitions? And I know Oxford's not -- and what sort of Oxford considered like have an impact on the margins? It's just I'd love to get your general thought on near term and the longer-term margin profile. Thank you.

Jamey Mock -- Senior Vice President & Chief Financial Officer

Yes, sure. So let me answer the last part quickly. So Oxford is not assumed in any of this guidance, we probably should have made that clear. Horizon is the only one that we've closed on. So Horizon is embedded in this overall guidance here. So let me talk to the year and then I'll talk to the sequence throughout the year. Overall, obviously, we're guiding at least $8.50 which is up $0.20 cents. The COVID overall revenue is flat as we mentioned, and then the core growth kicks in. So we probably get about $0.60 increase due to the volume. And then we're reinvesting that back in the OpEx. I'll talk to overall gross margin. So gross margin, we're expecting to be flat year-over-year, that has some assumptions that the COVID pricing and margin starts to dilute a little bit. And then our core book is we work on our productivity programs, as well as have more volume leverage kicks in and that keeps gross margin overall flat. And then we will continue to reinvest into OpEx here.

So we started that toward the second half of last year, we're going to continue to do that, I would say we have a very flexible variable cost -- or overall cost base. So we can toggle this on and off with the level of growth that we have. We want to continue to do so. And we'll make the investments that we have been both in our talent, R&D, digital et cetera. In terms of progressing through the year, obviously, with a sip more material COVID, first half the margin rates will be much more substantial. And then in the second half, it'll be -- our assumption is that it comes down when we start to accrete -- offset 2019 platform. So you mentioned Tycho's conference. And we laid out a 2023 game plan to be 23% or better, we certainly have not lost sight that this business overall can be 25% plus. And we will start to grow margins here in the back half of this year from a productivity programs perspective and extra volume. So I'd look at 2019 levels toward the back half of that year and add some productivity to it. And that's what we expect there.

Derik DeBruin -- Bank of America -- Analyst

Great, thanks for the input. I'll get back in line.

Jamey Mock -- Senior Vice President & Chief Financial Officer

Thanks, Derik.

Operator

Thank you. Our next question comes from Dan Arias with Stifel. Your question, please.

Dan Arias -- Stifel -- Analyst

Good afternoon, guys, thanks. Jamey, can I just go back to the question on the guide. I mean, I thought the idea was that you guys are kind of trying to convey that this is a business that can do 5% to 6% organic in a normalized environment. So against the minus 6% comp that seems pretty conservative. Is there something that I'm missing there? Is there an element that maybe I'm not understanding?

Jamey Mock -- Senior Vice President & Chief Financial Officer

Yes. I mean, I'm not sure I would say today's a normal environment. I think people are starting to live in a new normal environment. But I think right now, it's still I wouldn't say, the completely robust environment. That doesn't mean we feel confident that the long-term prospects are much faster from a growth perspective coming out of 2020, then going into 2020. And so -- but we've seen a steady, as I mentioned earlier Dan that we've seen the steady increase quarter-over-quarter. So if you -- as I mentioned, we went up about six points each quarter and three points in the fourth quarter. But if you normalize some things, probably a little bit more. And so overall, we feel very confident that the five to seven is an achievable number here. And we're -- could there be a scenario that this is better than that? Yes. We -- I mentioned in my prepared remarks that we're not banking on any pent-up demand. But we can go through the end markets, and we feel like five to seven is an appropriate guide at this point in this market environment.

Prahlad Singh -- President & Chief Executive Officer

And given the uncertainty, Dan, I think in the second half, just like on the COVID side our intent is to ensure that we put a number given all the assumptions that we've made that we can be, and then that's what you are -- but that's the way we forecast it.

Dan Arias -- Stifel -- Analyst

Okay. But just to be clear, it does look like you're -- you exited the year with a DAS backlog that's good. You're seeing some improvement in food safety demand that makes you think that maybe overall the food businesses is trending in the right direction. And then on the diagnostic side, it sounds like on the ImmunoDx business on the non-COVID side of that you're approaching normalized, right. I mean, so for lining up the thing that seemingly could take you higher, it feels like there are a couple of elements here that suggest that that could actually take place. Is that true?

Jamey Mock -- Senior Vice President & Chief Financial Officer

Yes. I mean, I think there are certainly -- there's certainly a possibility that the end markets can perform better than what we're planning on right now. And if that happens, we could certainly be north of 5% to 7%. And if COVID comes out faster and the economy returns back to normal, maybe have a little bit more uplift there. But to your point, I think food is an area that has potential upside. I think right now we're planning on high single digits for immunodiagnostics. I wouldn't say that it's completely normalized. I think EUROIMMUN was slightly positive across the globe in the fourth quarter when you exclude their COVID sales. So it's not yet perfectly normalized here and I think that's why we're showing kind of a slow and steady uptick here. But certainly, if it returns to normal and if it's faster and we have some pent-up demand we'll see it, but it should be much -- it should be greater than 5% to 7%.

Dan Arias -- Stifel -- Analyst

Okay, Bryan. Good luck. Don't be a stranger.

Bryan Kipp -- Vice President of Investor Relations

Thank you.

Operator

Thank you. Our next question comes from Tycho Peterson with JP Morgan. Your question, please.

Tycho Peterson -- JPMorgan -- Analyst

Hey, thanks. I just want to follow up Jamey on some of your COVID comments, a couple cleanups here. Serology, I think heard you mentioned that a lot. And obviously with vaccine rollout curious about your views on whether that gets more interesting, especially as you add option to the mix. Also are you still planning to launch an antigen test? I know, you've previously talked about doing something with tumor. And then on the California lab, 20,000 tests a day versus 150,000 capacity, is there any risk at some point, if you don't hit certain threshold that that doesn't move forward?

Prahlad Singh -- President & Chief Executive Officer

So, you want that?

Jamey Mock -- Senior Vice President & Chief Financial Officer

So -- yes, you want me to answer California first, and then, yes. Yes, we're still -- Tycho, right now we are not at 150,000 capacity. So we have been going at the pace that California Department of Health has asked us to. We got up to 40,000, I think in January here, and they've asked us to continue to uptake that so that we are ahead of what they -- how they onboard sites, and I think I've mentioned in -- maybe at your conference actually that there's over 500 sites that they want to bring on. Right now, they've only brought on 100 sites or a little over 100 sites across the state of California. So we're not at 150,000, we're going at the pace they asked us to be and they will uptick their -- onboard their sites over time here and we'll stay ahead of them.

Prahlad Singh -- President & Chief Executive Officer

And Tycho, the serology and on the antigen test. On serology, our assumption right now is we've got QuantiVac CE-Marked and we are going to submit it for an EOA from EUROIMMUN and we've got a couple of T-cells options -- T cell options that we are looking. Obviously, one is from EUROIMMUN and there'll probably be -- assuming Oxford closes, we have that option, too. So I think in the post vaccine world, we see a role for it. We've not made a big assumption around that in the numbers that we forecasted, as of now. On the second one, on the rapid antigen test, if you recall, in the fall, in fact, during the CEO series that you had done, we had talked about the fact that we would come out with one, when we feel that it's probably of the same quality comparison as we have on the RT-PCR. And at this point, we feel pretty comfortable that we have something that we might come out with which is probably at par or if not best of -- best in standard in terms of what's out there. So few weeks more to go. And that should that should be something we'll be able to share.

Tycho Peterson -- JPMorgan -- Analyst

And a lot of other plans for Explorer -- 10,000 samples a day, obviously a high throughput system in terms of future may you build that or do you envision customers in decoupling that as a pandemic systems appliance?

Prahlad Singh -- President & Chief Executive Officer

No, I think there's both organically future menu build out on those ourselves, and also adding other components to it from a detection capability perspective for our customers, NGS and things to that effect and adding kits on that side. So there's a lot of work going on that from an R&D perspective Tycho.

Tycho Peterson -- JPMorgan -- Analyst

Okay. And then, lastly, China, just curious whether you think that gets back to growth in the first quarter or what are kind of the leading indicators are?

Prahlad Singh -- President & Chief Executive Officer

I think it'll get back to growth in the first quarter, but I think, I don't know --

Jamey Mock -- Senior Vice President & Chief Financial Officer

Exactly coming off a pretty easy comp year Tycho, so embedded in the 1% to 3%. Has a pretty high China growth rate.

Tycho Peterson -- JPMorgan -- Analyst

Okay, thank you.

Prahlad Singh -- President & Chief Executive Officer

Yes.

Operator

Thank you. [Operator Instructions] Our next question comes from Steve Beuchaw with Wolfe Research. Your question, please.

Steve Beuchaw -- Wolfe Research -- Analyst

Hi, good afternoon. And before asking anything, I would echo to congrats to Bryan. Well deserved.

Bryan Kipp -- Vice President of Investor Relations

Thanks, Steve.

Steve Beuchaw -- Wolfe Research -- Analyst

I'll ask a two parter and it's for Prahlad. It has to do with how you want people to think about news flow in 2021 on your diagnostics lineup outside of COVID. One is you've talked a little bit about publications and validation work on Vanadis. I wonder if you could give us any sort of details as to what you're thinking about there and then Part two is, you've commented before that to leverage your expanded molecular diagnostic presence in part with the pretty large numbers that you have out there in terms of instrumentation. You might look at more partnerships or assay development efforts. I wonder if you could share anything incremental on that front. And they'll drop back in queue. Thanks so much.

Prahlad Singh -- President & Chief Executive Officer

Sure, Steve. So on Vanadis, I think we've got two to three publications that are coming out in the first half of this year. I think there was one that came out at the -- close to the end of last year. So you've got a good pipeline of publications coming out. And again, I'll reiterate what I have said earlier Steve, we continued to be very confident on Vanadis. We've got a very strong pipeline. Our challenge really right now is being able to ship, install and train. So maybe it's probably in the next couple of quarters, we will start seeing that coming into play. On the second question around how do we -- on adding more menu to our installed base or incremental installed base we have put in, I think, again, there we are going with a three-pronged approach. One, organically what we develop through EUROIMMUN or through our Turku and Taicang labs. Second, partnering with other companies that have got approved molecular assays that are out there. And third, obviously, is the M&A and acquisition targets. So that number two and number three are in place, Steve, and hopefully, we'll have something more to announce in the second half of the year.

Steve Beuchaw -- Wolfe Research -- Analyst

Thanks so much.

Prahlad Singh -- President & Chief Executive Officer

Yes.

Operator

Thank you. Our next question comes from Dan Leonard with Wells Fargo. Your question, please.

Dan Leonard -- Wells Fargo -- Analyst

Thank you. So two parter, on the COVID assumptions, I think I might be helpful to understand if the component of your PCR, RNA extraction business how much of that is equipment versus consumables as we make assumptions around durability? And then just to clean up, can you offer out the China growth rate in the quarter and what you expect, broad brushstrokes to look like in '21?

Jamey Mock -- Senior Vice President & Chief Financial Officer

So yes, I mean, from an instrument perspective Dan, it's probably less than 10% of the revenue overall. I missed the second part, what was it?

Prahlad Singh -- President & Chief Executive Officer

China.

Bryan Kipp -- Vice President of Investor Relations

What was the actual growth rate in 4Q and then our expectation in 2021?

Jamey Mock -- Senior Vice President & Chief Financial Officer

China was down mid-teens in the fourth quarter. So if you go through the progression of the year down to 33%, in the first quarter, and it got a little bit better throughout the entire year. But then, -- and then as we go into the next year, our assumption is that it is high single or double digit for China throughout the year here starting in the first quarter.

Prahlad Singh -- President & Chief Executive Officer

And Dan, when you look at that it's split diagnostics is worse than what we saw an aggregate for China and 4Q and DAS is better, analytical stronger than the aggregate.

Dan Leonard -- Wells Fargo -- Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from Steve Willoughby with Cleveland Research. Your question, please.

Steve Willoughby -- Cleveland Research -- Analyst

Yes, hi. Thanks for taking my questions. And good luck, Bryan. Jamey, I was wondering if we could just circle back one more time on the -- some of the assumptions as it relates to COVID. I guess, first you talked about how the State of California has asked you to increase capacity in that lab there. So I presume that that would also mean that you're -- basically the minimum amount of revenue you should expect to receive from that contract should increase in the first quarter versus what you saw in the fourth quarter. And then in the UK, I believe your -- larger of your two labs didn't open until the beginning of December and that has continued to ramp up we believe. So should both California and the UK contribute meaningfully more in revenue COVID revenue in the first quarter versus what you saw in the fourth quarter?

Jamey Mock -- Senior Vice President & Chief Financial Officer

No, actually. So it's about flat to the fourth quarter, Dan -- Steve, so you're right on California that overall in the fourth quarter was minimal amount of capacity and volume. So that'll substantially uptick in the first quarter here. But as it pertains to the UK, as I mentioned earlier, first of all, in the fourth quarter, they -- we had a lot of instruments sales, as well as an implementation fee, and some stocking both due to Brexit and the risk of Brexit as well as getting ready for the first quarter ramp. And right now, our assumption in the first quarter is that there are much less reagents because we're not sure whether we will continue on with the contract after the first quarter here. So right now, it's basically [indecipherable] and California comes up in your overall flat.

Steve Willoughby -- Cleveland Research -- Analyst

Can I ask a follow-up on that, Jamey, just how are you guys thinking about that UK contracts going beyond March? I mean, if there's any way to ballpark if you think that continues or not.

Prahlad Singh -- President & Chief Executive Officer

We don't have any --

Jamey Mock -- Senior Vice President & Chief Financial Officer

We don't have it in our guidance at all.

Prahlad Singh -- President & Chief Executive Officer

So, if that comes in -- if that comes through that will be upside.

Steve Willoughby -- Cleveland Research -- Analyst

Thanks very much.

Prahlad Singh -- President & Chief Executive Officer

Yes.

Operator

Thank you. Our next question comes from Doug Schenkel with Cowen. Your line is open.

Doug Schenkel -- Cowen & Company -- Analyst

Hey, guys, good afternoon. Jamey, I know you provided some commentary on margins in response to I think it was Derik's question earlier on the call. But could you just maybe provide a bit more detail on why there isn't a bit more earnings leverage in 2021? You're expecting to grow the top line, I think around 8%. And I think with the flow through you're talking about only about 3% earnings growth. What were some of the key factors we should be considering as we think about 8% versus 3%?

Jamey Mock -- Senior Vice President & Chief Financial Officer

Yes, so two things. One is that Horizon is basically -- we said, nominally accretive here, so you have a lot more OpEx cost as a result of that. I said, overall, gross margin, we're assuming is flat. And then we're going to uptick our R&D and selling and marketing and some of our digital investments here, Doug. So I think we're using some of that profitability this year to invest in the OpEx line and continue to improve the outlook from a growth rate standpoint.

Doug Schenkel -- Cowen & Company -- Analyst

Okay, that makes sense. And then, one for Prahlad. One of the clear goals that you've articulated, and taking the helm as CEO has been to better integrate acquisitions, the sales force, and R&D organizations across the company. Yes, we've seen some clear progress on that front. I was curious if you could just provide a bit more detail on how you see Oxford and Horizon filling into the strategy or I should say, fitting into the strategy, and what are some examples of areas where you can leverage capabilities to accelerate growth for both of these deals? Thank you.

Prahlad Singh -- President & Chief Executive Officer

Sure, Doug. I think the way what we've done and the reason it has worked for us so far is we have always integrated our acquisitions, right rather than heavy or light or appropriately. And I think maybe I can talk a lot more around Horizon than on Oxford, because we haven't closed on Oxford. But as you think through it, right, if we give you one example, Horizon has a group of strategic account managers with pharma that are very well penetrated, and a lot of the business flow through comes from them. So in this case, for us, it's more of a reverse integration, just to give you an example, where we can build on that core competency that Horizon has around strategic account managers, specifically in pharma and biotech, and use them and add our assays and imaging and detection portfolio and discovery portfolio to that back. So for us, what is more critical is to look at the opportunity that -- look at the target that we are integrating and see where there are opportunities, and most of our focus right now has gone around commercial synergies and technology synergies.

And obviously, Jamey and I both have talked earlier about the whole aspect around how we bring in our automation expertise, for example with Oxford. So that will play a role. That doesn't mean that we don't have the cost synergies or the corporate opportunity of -- the cost opportunities around corporate costs. But for us, the focus is primarily around commercial and technology synergies.

Operator

Thank you. Our next question comes from Matt Sykes with Goldman Sachs. Your question, please.

Matt Sykes -- Goldman Sachs -- Analyst

Thanks for taking my question. And congrats again, Bryan; well deserved. I just wanted to -- just one question for me just on the DAS division. Obviously, Life Sciences had a good fourth quarter. I just want to get it the sustainability of enterprise and discovery within that. And if that is sustainable, how should we think about food and applied kind of coming up the curve as they recover? And how is that kind of fit into your guide for the year?

Jamey Mock -- Senior Vice President & Chief Financial Officer

Sure. Yes, Matt. So I'd say discovery -- the overall, as we laid out in December, we're encouraged by the Life Sciences franchise as a whole and we've said that long-term we believe it can grow 6% plus. Discovery is certainly gotten a lot better. Enterprise is coming off a little bit of a tough comp as we head into this year, so we're a little less bullish there. Informatics has been consistent overall, that kind of 10% plus, so Life Sciences look strong. Food has been a more challenging market to understand here and see what will happen where we're assuming some kind of rebound here in 2021, but not gangbusters, so I would say it's a mid-single digits as well. And so that could be an area that provides additional growth versus our current guide.

Matt Sykes -- Goldman Sachs -- Analyst

Great, thanks a lot.

Operator

Thank you. Our next question comes from Brandon Couillard with Jefferies. Your question, please.

Brandon Couillard -- Jefferies -- Analyst

Hey, thanks. Just a high-level question for Alan, do you think about just capital deployment priorities obviously, you're thrown off a lot of free cash flow, you've already done two deals, sort of about your bandwidth to absorb another acquisition right now. You'd expect to sort of take a pause or s you absorb the Oxford and Horizon, and then just your appetite for share repurchases this year.

Prahlad Singh -- President & Chief Executive Officer

Brandon, our priority will remain on M&A. And I think our appetite is pretty good. And I think we will be acquisitive in 2021.

Jamey Mock -- Senior Vice President & Chief Financial Officer

And on share repurchases Brandon, we assume in our outlook here that we're going to keep it flat year-over-year.

Brandon Couillard -- Jefferies -- Analyst

Thanks.

Operator

Thank you. Our next question comes from Jack Meehan with Nephron Research. Your question, please.

Jack Meehan -- Nephron Research -- Analyst

Thank you. Just a couple on the reproductive health segment. I was wondering if you give us an update on genetic testing, how that business performed in 2020. Guessing a little bit of pressure from the pandemic, but what's the outlook looks like for 2021? And then what are the expectations for newborn screening? You have some easy comps, but just talk about how that's going to trend throughout 2021?

Prahlad Singh -- President & Chief Executive Officer

Sure, I think from 2020 perspective, obviously, the pandemic did have an impact on genetic testing, not for us for the industry as a whole. But it has started coming back. And also keep in mind, Brendan, that most of the team there was focused on ensuring that the California and the UK labs get up and running. So our focus had shifted, because they sort of are the nucleus of ensuring that these labs, take off and we execute flawlessly. From a reproductive health perspective, our assumption I think going into it is low single digits for the year. We continue to see -- we've seen continued pressure on birth rates for the past few years. But again, as I've said earlier, that's not sustainable. So our assumption on that is probably flat to low single digit decline on birth rates, but compensating that with menu expansion, and some of the new NPIs that we've talked about. Ion being one of them, I think, SMA and DMD, right. So that's sort of our thinking around reproductive health.

Operator

Thank you. And our last question comes from Dan Brennan with UBS. Your question, please.

Dan Brennan -- UBS -- Analyst

Great, thanks for taking the question. Bryan, best of luck with the new role. So really, it's a two-part question on testing, if you don't mind, just how are you thinking about the impact of rapid antigens just on PCR in your franchise as you look out? And then two well, I know, there's a very wide range of outcomes with the vaccine and kind of what happened to testing, but any, any way to think about like kind of guideposts as we cycle past even '21 and the '22, just given how big of a part of a business it is, obviously, symptomatic testing may come down, but you could have a lot of screening, that takes up the slack, just kind of wondering, just some early thoughts about just kind of a range of outcomes we might contemplate. Thank you.

Prahlad Singh -- President & Chief Executive Officer

Sure. I think one thing to keep in mind is even around RT-PCR the benefit that we have is we have a full array of assays around RT-PCR that are FDA approved -- EOA approved. As you look at it, we've got pooling, we've got asymptomatic. So as this moves forward, and as pooling starts to play a role around RT-PCR, we already have an EOA approved assay for symptomatic and asymptomatic. Outside of that Dan, as you look at rapid antigen testing, our intent is to bring out a test there, which has a high level of sense and spec because the idea really is that you don't want to be in your low 80s or late 70s in terms of sense and spec when you want to release that test and that's why we have not been the first one to the game, but I feel very confident that when we come out with one, it be the sensitivity and specificity of the test will be compelling enough for it to gain rapid traction.

Dan Brennan -- UBS -- Analyst

Great. Okay, Prahlad. Thank you very much.

Prahlad Singh -- President & Chief Executive Officer

Yes. So, thank you. Thank you, operator and thank you all for your questions. As we shared -- both of us shared 2020 has -- was a seminal year in our long and storied history. Our team is energized and focused on building off our recent successes and we want to challenge -- tackle the challenges of tomorrow. I want to again take the opportunity to thank the 14,000 employees across the globe. Thank you for your interest and support of PerkinElmer and I look forward to providing further updates on our first quarterly earnings call. Thank you.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Bryan Kipp -- Vice President of Investor Relations

Prahlad Singh -- President & Chief Executive Officer

Jamey Mock -- Senior Vice President & Chief Financial Officer

Vijay Kumar -- Evercore ISI -- Analyst

Derik DeBruin -- Bank of America -- Analyst

Dan Arias -- Stifel -- Analyst

Tycho Peterson -- JPMorgan -- Analyst

Steve Beuchaw -- Wolfe Research -- Analyst

Dan Leonard -- Wells Fargo -- Analyst

Steve Willoughby -- Cleveland Research -- Analyst

Doug Schenkel -- Cowen & Company -- Analyst

Matt Sykes -- Goldman Sachs -- Analyst

Brandon Couillard -- Jefferies -- Analyst

Jack Meehan -- Nephron Research -- Analyst

Dan Brennan -- UBS -- Analyst

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