Luminex Corp (DE) (LMNX) Q4 2020 Earnings Call Transcript

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Luminex Corp (DE) (LMNX)
Q4 2020 Earnings Call
Feb 8, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to Luminex Corporation's Year-End 2020 Earnings Conference Call. My name is Carmen, and I will be your coordinator for today. [Operator Instructions].

I will now like to turn the call over to Harriss Currie, Senior Vice President and Chief Financial Officer for opening remarks. Please proceed.

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

Good afternoon and thank you for joining us. With me today is Homi Shamir, our Chairman, President and CEO. Following our comments, we'll take your questions. As a reminder, today's conference call is being recorded and a replay will be available for six months on the Investor Relations section of our website.

Certain statements made during the course of today's call may not be purely historical and consequently maybe forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and the company claims the protections provided by Section 21E of the Securities Exchange Act for such statements. These forward-looking statements speak only as of the date hereof and are based on our current beliefs and expectations and are subject to known or unknown risks and uncertainties, some of which are beyond the company's control that could cause actual results or plans to differ materially and adversely from those anticipated in the forward-looking statements. Factors that could cause or contribute to such differences are detailed in our Form 10-K for the year ended December 31, and our quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. We encourage you to review these documents and we undertake no obligation to update these forward-looking statements.

Also, certain non-GAAP financial measures as defined by SEC Regulation G may be covered in this call. To the extent that any non-GAAP financial measures are covered, a presentation of and reconciliation to the most directly comparable GAAP financial measure will be included in our earnings release, which is available on our website in accordance with Regulation G.

I'll now turn the call over to our Chairman, President and CEO, Homi Shamir.

Nachum Shamir -- Chairman, President and Chief Executive Officer

Thank you and welcome. We ended 2020 on a strong note, posting record revenue of $111 million for the fourth quarter and $417 million for the full year, up 25% over 2019. Additionally, we improved our profitability to our highest level ever, posting more than $71 million in EBITDA and generating more than $50 million in cash from operation, ending the year with a cash balance of approximately $310 million.

During 2020, we had the strong tailwinds in MDx revenue, while we had initial pressure on our life-science revenues recovered very nicely during the third and fourth quarters. With our focused R&D effort, we developed three exciting products, that not only played an important role in addressing the pandemic, they also significantly contributed to our growth for the year and set a solid foundation for continued growth, and there are more important assays coming.

We also expanded our manufacturing capabilities significantly, with a fourfold increase in ARIES manufacturing capacity, a ninefold increase in xMAP manufacturing capacity. We are also investing in additional expansion of our facilities to accommodate future growth. As we enter the new year, we have become an even more diversified, rapidly growing company, with several new products expected to come to market. This new product and the planned increase in our ARIES manufacturing capacity will help support our growth expectation of over 15% and that will also further expand both our profitability and cash position.

Fortunately, our diversified model has positioned us well for the post-COVID marketplace. However, we believe that COVID tailwinds will be with us for the long term. Specifically, we expect testing volume to continue to be on in the near term, as we consistently hear from our customers, they need more test capacity. When the absolute volume of testing ultimately slows, we will be well positioned to continue our growth, although at a more normal growth range.

One important factor to consider, is the number of MDx systems that we place, are under reagent rental agreement with our customer, who typically, are hospitals and reference labs. This agreement typically provides for a committed revenue stream over the next three to five years. At the end of the year, we had grown to a total of approximately 900 MDx customers.

Also, as COVID testing slows and research institutions, pharma laboratories and academic labs open back up, we should see growth in both partner and flow activity. Overall, we are excited about the future and our focus on our execution to ensure that our success continues.

With that, I would like to turn it over to Harriss, for more on the financials and then return for some final comments.

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

Thanks Homi. As Homi mentioned, we closed the year with strong operating profits and record revenue in the fourth quarter of 2020. Consolidated revenue is up 23% over the fourth quarter of 2019 to $111.4 million, with operating profit at 9% of revenue. For the full year, consolidated revenue was up 25% to $417.4 million, with operating profit at 10% of revenue. Significant growth of our molecular diagnostics portfolio as compared to the prior year, significantly contributed to those results.

Looking at our revenue line items, system revenue grew by $3 million to $23.8 million or 14% compared to the fourth quarter of 2019, while the full year was up $0.5 million to $70.8 million or 1% over 2019. For the year, although system revenue was up modestly over 2019, we did have some significant movement within our respective system revenue streams. As we mentioned before, our flow system revenues were significantly impacted by the effects of the pandemic and were down for the year, and our system revenue through our partners was down modestly by 2% year-over-year for the same reason. Those increases were fully offset by our success in molecular diagnostic system placements resulting from customers, desiring to use the systems and assays we had available to address pandemic testing.

During 2020, we placed over 970 multiplexing systems, not including ARIES and VERIGENE systems, and we placed nearly 450 sample-to-answer molecular diagnostic systems in the year, up 118% over 2019 placements. Consumable revenue was up 11% for the quarter and 1% for the year to $13 million and $48.9 million for the quarter and full year respectively. This increase was mainly due to higher non-bulk purchases from partners.

Royalty revenue was $13.9 million for the quarter and $48.9 million for the year, up 3% for the quarter, but down 9% for the year. This decline was primarily attributable to lower than expected end user sales reported by our partners as a result of the COVID pandemic, with most of the reductions taking place in the back half of the year. As a reminder, total royalty revenue includes base royalties, coupled with audit findings, self-reported shortfalls and accrual adjustments. At the end of 2020, our partners were indicating a recovery in their respective businesses, and we anticipate that royalty revenue will continue to grow throughout 2021.

Total assay revenue was up 41% for the quarter and 60% for the year to $51.3 million and $211.9 million respectively. Our molecular diagnostic assay revenue comprised approximately 98% of our total assay revenue, with minor contributions from both flow assays and assay sales within our research revenue stream. Our combined respiratory related products comprised 60% of our total assay sales in the quarter and 65% for the year, and was up more than 100% compared to the prior year resulting from the pandemic. Non-automated molecular diagnostic revenue was up 40% and 70%, respectively, compared to the fourth quarter and full year 2019, and sample-to-answer molecular diagnostic revenue was up 56% and 59%, respectively, compared to the fourth quarter and full year 2019. Service revenue was up 12% and 4% for the quarter and for the full year and to $6.3 million and $23.3 million, respectively, a function of having more Luminex instruments in the field and under service agreements.

And finally, all other revenue was also up. 28% over the fourth quarter 2019 to $3.1 million and 74% over the full year 2019 to $13.6 million. Included in all other revenue for the year, is approximately $1.3 million of BARDA funding related to the two COVID assay development projects Homi mentioned earlier.

Gross margin expanded by 3 and 4 percentage points in the quarter and full year, to 58% for the quarter and 59% for the full year. The economies of scale realized from scaled up manufacturing in 2020 was a primary driver for this margin expansion. As we indicated in our previous calls, gross margins can fluctuate modestly, as a function of mix, resulting in sequential changes from previous quarters. Operating expenses were up 15% and 5% for the quarter and full year to $53.9 million for the quarter and $205.4 million for the year. These increases were primarily driven by higher sales and marketing expenses, as a direct result of our growth in sales, which experienced 25% growth in the quarter and 16% growth for the full year.

Strong expansion in both our revenue and gross margins over the prior year contributed to significant improvement in operating profit, which grew by $7.5 million in the fourth quarter to $10.5 million. The full year grew by $54.5 million to $42.4 million. Operating profit as a percentage of revenue was 9% for the quarter and 10% for the full year.

The distribution of profit and loss across our worldwide subsidiaries, significantly affected our effective tax rate for the quarter and year. For the full year 2020, our effective tax rate was 47.6%. Our fourth quarter rate reflects adjustments in income tax expense to arrive at the full year rate. This was a result of changes in our mix of earnings in the U.S. and foreign jurisdictions. Cash taxes are about half of that amount.

Our balance sheet remains strong, with approximately $310 million in cash and investments. This reflects net cash proceeds of $217.6 million from the issuance of convertible debt in the second quarter of 2020, and cash flow generation from operations of $49.9 million in the year, while also, absorbing the payment of almost $17 million of dividends and capex purchases of nearly $18 million.

And finally, some additional visibility for 2021. As a result of a lingering amount of uncertainty surrounding the short-term revenues, resulting from the continuation of the COVID pandemic and various new strains emerging, we have decided to pull away from forward quarter guidance for the short-term, until more certainty around the absolute volumes of testing, the lasting effects of COVID for the longer term, and the effects of those issues on our respective revenue streams becomes more predictable. We remain confident in our full year projections and anticipate that we will return to forward quarter guidance sometime soon.

For the full year, however, we currently expect 2021 to be another strong year for Luminex. We anticipate a minimum of 15% growth to at least $480 million in revenue. As we mentioned before, the completion of our ARIES expansion to a capacity of around 5 million tests per year will be the primary enabler here. As a result, the primary driver from a line item standpoint will be assay revenue growth in excess of 20%, most of which will be molecular diagnostic products. As a result of the partner recovery I mentioned earlier, we also expect royalty revenues to return to growth at around 10%, systems and consumables should be in line with 2020, as a result of partner recovery, offset by reduction in the absolute number of molecular diagnostic systems placed.

Obviously, new product launches, including those requiring EUA or approval from the FDA are also key to our success, but we are extremely confident in our ability to execute and deliver on a going-forward basis. Gross margins remain in the 60% range for the year, with continued control of operating expenses. We anticipate both increased profitability and cash flow.

With that, I'd like to turn it over to Homi for some final comments.

Nachum Shamir -- Chairman, President and Chief Executive Officer

Thanks Harriss. 2020 was a year like no other we have ever experienced. Luminex performed outstanding, and we are grateful to our employees and their families for dedicated effort to fight this global pandemic. The safety of our employee is the utmost important to us, but at the same time, we must continue delivering product to our customer. And as we begin 2021, we anticipate that the pandemic will continue to play a major role this year as well.

We are confident in our projection of 15% growth this year, coupled with improved profitability and cash flow and the launch of several new and exciting products, that will help us fight the COVID pandemic, as well as expanding our best portfolio. We are looking forward to time when we get past the impact of COVID-19, but will do everything we can until then, to continue to help address the challenges that this pandemic brings with it.

Let's all be healthy and safe. With that, I would like to turn it over to the operator for your questions.

Operator

Thank you. But before we open the line for questions, I would like to turn the call back to Homi for some additional comments.

Nachum Shamir -- Chairman, President and Chief Executive Officer

Finally, I wanted to give a quick real-time update on the FDA. We continue to make good progress on the warning letter and are almost done and ahead of schedule to complete all our deliverable and committed to the agency. Concerning the two pending EUAs, the NxTAG RPP plus COVID panel, we believe we are on track for approval very shortly.

With respect to the VERIGENE SARS COVID assay, the status is more puzzling, as we are in active review of this submission and received a letter last Thursday afternoon, explaining that the agency was declining the review the EUA for VERIGENE-I COVID-19 at this time, because they are prioritizing tests that they think will increase testing accessibility, such as point of care and at-home tests. We are reviewing options to challenge this decision, since we believe getting this product in the hands of the hundreds of customer who have requested it, it will rapidly increase accessibility. Still, at this point, we cannot say whether we will be successful in reversing this decision. However, we are still planning to submit additional EUAs to the FDA during this quarter.

Thank you. Operator, let's get to questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Sung Ji Nam with BTIG. Your question please.

Sung Ji Nam -- BTIG -- Analyst

Hi. Thanks for taking the questions. Could you, Homi, just clarify the VERIGENE II, the FDA -- I guess rejecting the review process? I'm sorry, what happened to VERIGENE I?

Nachum Shamir -- Chairman, President and Chief Executive Officer

Yes, it's VERIGENE I. Yeah, go ahead.

Sung Ji Nam -- BTIG -- Analyst

Sorry. They're reviewing both or VERIGENE I and not II?

Nachum Shamir -- Chairman, President and Chief Executive Officer

No -- yeah. At the moment, as I said, we have two active EUA reviews with the agency, where the next step COVID-19 -- to add the COVID-19 to the next -- COVID-19 and full [Indecipherable] into the next step and we have a stand-alone COVID-19 for VERIGENE I. We have not submitted yet the VERIGENE II and ARIES, together with COVID-19 and Flow MB which is scheduled to be submitted later on during this quarter. And we were in active review of the VERIGENE I and we received a letter on Thursday from a different department in the FDA, that stated that they are declining it, due to other priority for testing. We obviously think it's not correct, because the VERIGENE I -- adding an assay on VERIGENE I COVID-19 to -- close to 800 customers using a VERIGENE I instrument and all of them are major hospitals across the nation, is a substantial need for them. As a matter of fact, they are requesting us to do so.

So I'm hoping that we will write a letter to the FDA and hopefully they will reverse their decision. But we wanted to be upfront in -- what is happening. It took us all by surprise.

Sung Ji Nam -- BTIG -- Analyst

Okay, got it. And then any updates in terms of IVD assays in non, I guess respiratory related? Is the FDA still putting things on hold?

Nachum Shamir -- Chairman, President and Chief Executive Officer

Everything is on hold.

Sung Ji Nam -- BTIG -- Analyst

Okay. Any visibility in terms of when they might start reviewing those again?

Nachum Shamir -- Chairman, President and Chief Executive Officer

No idea, and my feeling is that we'll probably do it till -- a slowdown in pandemic, EUA approval, etc. So it's going to be for a while.

Sung Ji Nam -- BTIG -- Analyst

Okay. And then lastly from me, just -- we would love to hear kind of the latest feedback on INTELLIFLEX, how that launch is going? I think you guys are targeting kind of a broader commercial launch this year.

Nachum Shamir -- Chairman, President and Chief Executive Officer

Yeah I mean -- actually all our major partners -- major partners in life science have the product now. Two of them are training their sales force, and ready to launch it. I don't have behind that, anymore comment to provide about it. But from the initial comment, they're all excited about the product. I mean, we have a large installed base that we are looking to upgrade it.

Sung Ji Nam -- BTIG -- Analyst

Great. Thank you so much.

Nachum Shamir -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. Next is Steven Mah with Piper Sandler. Your question please.

Steven Mah -- Piper Sandler -- Analyst

Great. Thanks Homi and Harriss. Maybe just a follow-up question on FDA. So did they give any other color why -- because you said point-of-care, but you said they're not prioritizing VERIGENE I. So does that mean that they're focusing then on the at-home lateral flow?

Nachum Shamir -- Chairman, President and Chief Executive Officer

Yes. That's right. In the letter, they said they are prioritizing tests, that will increase testing, accessibility such as point of care and at-home tests. That's what they said to us.

Steven Mah -- Piper Sandler -- Analyst

Oh, at-home care, OK.

Nachum Shamir -- Chairman, President and Chief Executive Officer

So that was that. It took us all by surprise and I don't want to go beyond that. But it took us all by surprise. As I said, this did not come even from our reviewer, that was reviewing that came from completely different part of the agency. So we will approach them and talk with them, because there is a very big installed base who need it. So sometimes they can make also human mistake.

Steven Mah -- Piper Sandler -- Analyst

Okay, great. And then maybe just a couple of questions then on your guidance. So you mentioned customer demand, so just COVID-19 is going to be strong in the next and the very near term, and there seems to be a lot more belief among people that we have not yet peaked in terms of COVID-19 testing yet. So that, and then plus the given -- given the new Biden administration stance, will likely increase COVID-19 national testing. Why would you reiterate guidance? What would it take for you to increase the year-end guidance or are you just being conservative?

Nachum Shamir -- Chairman, President and Chief Executive Officer

Well, first we would like to be conservative in this time, OK. And if you look what happened in Q4, initially we were a little bit concerned about the guidance for -- that we gave for the full year. We're reducing 5 million, and that we've beaten [Phonetic] 7 million. It's very odd at this stage to try to predict what's happening and where we are going. Just a matter of argument, we all on this line know, for example, flu testing is very minimum, almost not exists. On the other end, if I go to life science, we need to go in order to recognize revenue, install system at customer. System that's coming mainly, I'm not talking about MBS in the life science, countries -- some countries are closed. Some institutions are closed, travel and etc. So you really don't have the flexibility to know from day to day what's happening, OK.

Even if I use the VERIGENE I issue with the agency, we were in active review. We were hoping to receive it almost any day. And suddenly out of the blue, we got this letter from the FDA. So all what we are saying is, we are feeling very confident that we will [Indecipherable] 480, but we rather not to be bound into trying to predict what happens next month or the next two weeks or etc, because it's beyond everybody's control. Yes we can provide the guidance, but we will be very conservative on that and we don't want to repeat what happened in Q4, when we reduced it and then we beat it substantially.

Steven Mah -- Piper Sandler -- Analyst

Yes, OK, that makes sense, Homi. And the contribution from VERIGENE I COVID testing, can we assume that's baked into the guidance you provided for the year or is that...

Nachum Shamir -- Chairman, President and Chief Executive Officer

There is -- for sure the risk there, because we build it. But again, the most -- don't forget so far, the contribution for COVID-19 on the VERIGENE I was zero. Okay. So we assumed something into the guidance. But on the other end, with the raise in the guidance, as I said, a lot ARIES -- ramp up of ARIES production that incorporate, and I think we have enough space there to -- either it will happen or not. Although I believe it should happen, to deliver the guidance. Concerning the guidance, again, we have to remember that the guidance also -- like every -- we provided guidance and a similar thing happened in 2020, probably 45% of the guidance or the revenue happening in the first half of the year and 55% happening in the second part of the year. So we're feeling it will be the same story or the same trend this year.

Steven Mah -- Piper Sandler -- Analyst

Okay, got it. And then my last question, similarly on guidance on life science and research tools business, does your full year revenue guidance, does it bake in some conservatism, given that there were some lockdowns, for example, like in California back in January? How are you guys thinking about that, especially given vaccine rollout seems to be less than optimal, than maybe have more outbreaks?

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

Yeah. So the way you have to think about it, Steven, is that what we built into the guidance, is I believe, I said in my comments was a moderate recovery of the life science size of business, both in flow and our partnership businesses, span a variety of different verticals within the life science landscape. So we're expecting some recovery. Although there are new strains, the vaccine in places is purported to not be working as well as they might expect. People are actually learning to live with it. You're beginning to see traffic again. You're beginning to see more people out. And so as they learn to live with it, as they allow us to come into their facilities and install systems, we will see growth in life sciences, in both flow and our partnerships recover. Maybe not 20% growth, right, in those businesses, but there will be some modest growth there. That coupled with the significant expansion of ARIES manufacturing that we believe will be significantly utilized, gets us to the 480. After that, when you think about upsides, there's a variety of things that could happen, but we certainly don't want to bake those in, until Homi says we get better visibility on that.

Steven Mah -- Piper Sandler -- Analyst

Okay, got it. Okay, so it sounds like you baked in quite a bit of conservatism. Okay. All right. Appreciate it. Thank you.

Operator

Thank you. Next we have Brandon Couillard with Jefferies. Your question please.

Brandon Couillard -- Jefferies -- Analyst

Thanks. Good afternoon. Homi or Harriss, is the new ARIES capacity effective in place -- effective now, as in the first quarter such that sample-to-answer revs should be up sequentially from that expanded capacity in the first quarter?

Nachum Shamir -- Chairman, President and Chief Executive Officer

Yes. We are ramping it up as we speak. Obviously, like every ramp up, you have some small hiccup and etc, but it's -- for sure you will see Q1 last year compared to Q1 this year, a substantial increase. But really, the biggest increase you start seeing Q2, and a further increase in Q3 and Q4, when we get more molds and we get there. But yes, you will see a substantial increase during this quarter already happening.

Brandon Couillard -- Jefferies -- Analyst

Thanks. And then Harriss, could you quantify the backlog that you exited with, coming out of the fourth quarter, mostly tied to the sample-to-answer business? And would you expect to recoup that ownership against most of that excess backlog in the first quarter? And then any color as far as just how to think about the seasonality of gross margins, as we move through the year understanding mix is kind of a wildcard, but is there any difference sort of between the first half and second half we should think about?

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

Well yeah, as Homi mentioned, think about first half, second half like 45%-55% when you think about the split of revenues. Certainly, we are -- if we were to deliver all of the close to $15 million of ARIES backlog in the first quarter, then you wouldn't then also buy that same volume of purchases that you had scheduled because now you have expiration issues and inventory issues to manage. So what you would expect, is a tick up in volume. You'd expect this to add accounts at a more rapid rate. So the overall volume of ARIES assay revenue, you would expect to go up, but you certainly wouldn't expect to satisfy all that backlog, plus sort of a standard forecast for the quarter. That would way oversupply the people that ordered. What we know, is that we have a number of people that want product. They want us to get as fast as we can. We've allocated as best we can. Now we'll be able to more fully supply those and over time, that number will work down to an almost meaningless level, if you will, as we move, except for orders that are placed for future delivery, that happens on a regular basis, right, scheduled orders from customers that order once a month, once a quarter, once a week to have those delivered and they make minor modifications to those as we go.

Brandon Couillard -- Jefferies -- Analyst

Super. And then do you happen to have a target number of new sample-to-answer placements you expect to make in '21, and any color as far as the timing of the V-II launch?

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

So, yes, what I would tell you. This year we did a tremendous number, 450. Last year, we did right at 200. We're going to be somewhere in the middle, most likely, with those. Unlikely, I would say to be, maybe as high as we were. But certainly it will be a healthy number for sample-to-answer placements. But keep in mind that if you have had an opportunity to see some of our recent investor discussions, that 75% of our revenue comes from recurring items, whether it's beads, royalties or assays. Every system we place, almost every system we place, unless it's replacement, layers on additional revenue on top of that. So you end up with a compounding effect as you go, as you sell more and more systems. And so growth happens naturally, if you will, as we continue to place systems and layer the new customers' volumes on top of the existing customers' volumes, and customers that we only had for a portion of the year, annualized in the following year. So a lot of math, if you will, that goes on there, that helps us drive revenues upwards.

Brandon Couillard -- Jefferies -- Analyst

Got you. Thank you.

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

You bet.

Operator

Thank you. Next question is from Brian Weinstein with William Blair. Your question please.

Griffin Soriano -- William Blair -- Analyst

Hi, guys. Good afternoon. This is Griffin on for Brian. Thank you for taking my question. Just first here, can you help us understand the trend in molecular diagnostics, a bit down sequentially over the last few quarters? Is that pricing coming in or early buying, and then how can we marry that up with the capacity expansion you're building with ARIES?

Nachum Shamir -- Chairman, President and Chief Executive Officer

Yeah, it's a good question. We have to remember, in molecular diagnostic, Luminex have three offerings in the COVID-19 or overall; it's the NxTAG, it's the VERIGENE I and ARIES. VERIGENE I, we do not really have any solution yet, as you heard earlier, but we did not have any solution for the COVID-19. As a matter of fact, we felt pressure there, because there is less blood culture testing, obviously less GI testing and less -- so that's put a pressure on the revenue in this product, because there is less specialization [Phonetic] as well.

On the ARIES, we ramp up very quickly and from Q1 and Q2, we were in maximum production until now, that we are doubling or continue to expand it and fill that. So that will give us the ramp up and really the fairly tremendous revenue of the ARIES coming online, because of the expansion of manufacturing. And the next step, again, it's having the same issue. We had -- very -- in the beginning of the pandemic, everybody ran to buy respiratory product. Now they are more concentrating on the COVID-19 and so we have the COVID-19 solution, but that's become a little bit more stagnant in the number. It's not going beyond what we saw before, and not declining. So really the goal for us will be coming out of the ARIES moving forward. We have not seen -- and one more thing about the pricing, we have not seen any pressure on our prices, because in any -- in most of the cases, we were fairly -- keeping our prices to what we used to sell before the pandemic.

Griffin Soriano -- William Blair -- Analyst

Okay. And on the ARIES, just on the guide, you're looking for about $63 million in incremental here in '21, most of that coming from ARIES, call it 4 million tests at 30 RSP, that's a pretty big bump from 2020. Why is the mid-single digit assumption on the base the right number and just can you touch a little bit more about that build to 480?

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

You're talking on the life-science's side of the business, the partner business and the flow business, correct, mid-single digit growth there?

Griffin Soriano -- William Blair -- Analyst

Yes.

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

Well, first of all the -- we talked about seeing some modest recovery on the life science side. We believe that COVID is going to be with us for a while, and especially it's going to affect this year, maybe not totally the way it affected last year, but it's certainly going to affect this year. And as it does -- but people learn to live with it. We're going to see recoveries there from where they bottomed out effectively in the third quarter of last year. We began to see recovery. We should continue to see recovery there. We don't want to overcall that too higher and the aggregate growth rates of the markets that our partners plan, were only growing in the mid to high-single digits to begin with, anyway. That's $150 million of an over $400 million business. The flow business was growing a little slower, around -- a little higher than 10%, much smaller number. Flow got hit hard last year, will recover some this year. You add all that together and you're in the mid-single digits and what is -- we'll call the life science business and molecular diagnostics grows at 20% plus, because of the manufacturing expansion.

Nachum Shamir -- Chairman, President and Chief Executive Officer

Yes. And we need to be conservative here because part of the challenge is -- look in Europe, we cannot travel now to install some systems, OK. And how long that's going to be? Initially when we -- you can think about Q1, but then people was talking about Q2 now, we saw the new strain of COVID-19. So you need to be conservative. If we beat the number and we hope we will beat the number, we will be all happy. So we did not want to come, with saying, OK, life science is going to go up 10% or whatever. We think mid-single digit number is something between 5% to 7% is at this stage -- under this situation, the best quote we can put out.

Griffin Soriano -- William Blair -- Analyst

Got it. That's helpful. Thank you. And to just squeeze one more in here on capital deployment. This is really an intent driven capital raise with that convert, over $300 million in cash. Can you give us an update on how you're thinking about targets and M&A, given the valuations that we're seeing in space today?

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

Yes. We're seeing a tremendous number of overpriced options today. A lot of options that we believe are overpriced and because we've been very careful, diligent about the acquisitions we've made, we've tended to pay a pretty reasonable price for the acquisitions we've made. We continue to look for those. We believe those opportunities will present themselves, and if they don't, then obviously we have to make other decisions around share buybacks or increased dividends or other things that we can do to ensure that our shareholders realize a reasonable amount of value.

Griffin Soriano -- William Blair -- Analyst

Great. Thank you.

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

You bet.

Operator

Thank you. [Operator Instructions]. Our next question comes from Tycho Peterson with J.P. Morgan. Your question please.

Casey Woodring -- J.P. Morgan -- Analyst

Hi. This is Casey on for Tycho. Maybe just going back to the 2021 guide, can you maybe talk a little bit about what you're baking in for new product rollouts, the INTELLIFLEX and VERIGENE II? How much upside maybe could a new product cycle contribute to 2021, or maybe just talk a little bit about that dynamic?

Nachum Shamir -- Chairman, President and Chief Executive Officer

We obviously put some INTELLIFLEX as an upside, but it's baked, as Harriss said, in the 5% to 7% goal of the life science, OK and we bake it. VERIGENE II, because it's a new product, we did not bake too much into that. And obviously when we get the agency approval on the EUA, which we are planning to submit, we'll take it from there. But as we keep saying, in order to get to the guidance is the life science in the ratios of 5% to 7% and really ramp up out of the ARIES manufacturing, and there is a lot of other opportunity that can come along. But that's really the way we look at the budget and all the guidance for this year.

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

I think very modest contributions from new products, with an opportunity if COVID resolves better than any of us ever thought that maybe we could move faster because number one, more opportunities open up for placements, for those that are on the fringe -- and -- that are on the edge. And secondly, the FDA speeds up their clearance of non-COVID related products. One, for instance, that would go on the VERIGENE II, the gastro product. So more the bigger -- the faster we can increase the menu on VERIGENE II, the faster the success we'll have, number one. Acquiring new customers with it, number two. Converting old customers who use VERIGENE I onto VERIGENE II.

Casey Woodring -- J.P. Morgan -- Analyst

Got it? And then maybe just one more for me on opex. I think you guys have been guiding to around flat opex for 2020, and it came in a little above. What should our expectation be for 2021 opex this year?

Nachum Shamir -- Chairman, President and Chief Executive Officer

Yeah, the opex came -- we were guiding to around 200, 201, came around 205 if I'm not mistaken, mainly because commission and other things that we had to pay. Don't forget when we started the year, our guidance was -- mid of the guidance was 357. So when you finish the year at 417, you need to pay more commission, you needed to do other things. But yes, I think the company has done and also we increased R&D activity, depreciation that already took place or accelerate on certain items and getting ready for this year. So yes, I think we have done an amazing job to controlling our opex in this pandemic. And we are looking at the -- obviously when you look at 480, we assume in the guidance that we will see more clinical plans there, as we are preparing mainly on the VERIGENE II but also in ARIES, as we are preparing to the day after the pandemic some travel, obviously, commission etc. So it's all been taken into account for 2021.

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

So expect growth, but growth that is less than the level of revenue growth that we're talking about. So that we end up passing some of that incremental profitability with appropriate margin maintenance down to operating profit. So we increase operating profit, of course, here. And as a result, you may have again seen some of our recent investor presentations where we've been calling an expectation of EBITDA for the year to grow as well. So you would expect growth in revenue, margin maintenance, control of opex with all resulting in the growth of earnings.

Casey Woodring -- J.P. Morgan -- Analyst

Got it. Thank you.

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

You bet.

Operator

Thank you. And this concludes our Q&A session for today. I would like to turn the call back to Homi Shamir for his final remarks.

Nachum Shamir -- Chairman, President and Chief Executive Officer

Thank you, operator, and thank you everyone for your attendance on our earnings call. We look forward to seeing you in person in the very near future.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Harriss T. Currie -- Chief Financial Officer, Senior Vice President, Finance and Treasurer

Nachum Shamir -- Chairman, President and Chief Executive Officer

Sung Ji Nam -- BTIG -- Analyst

Steven Mah -- Piper Sandler -- Analyst

Brandon Couillard -- Jefferies -- Analyst

Griffin Soriano -- William Blair -- Analyst

Casey Woodring -- J.P. Morgan -- Analyst

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