Danaher Corp (DHR) 2020 Q4 法說會逐字稿

Good morning. My name is Maria, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Danaher Corporation's Fourth Quarter 2020 Earnings Results Conference Call. (Operator Instructions)

I will now turn the call over to Mr. Matt Gugino, Vice President of Investor Relations. Mr. Gugino, you may begin your conference.

Thanks, Maria. Good morning, everyone, and thanks for joining us on the call. With us today are Rainer Blair, our President and Chief Executive Officer; and Matt McGrew, our Executive Vice President and Chief Financial Officer.

I'd like to point out that our earnings release, the slide presentation supplementing today's call and the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are all available on the Investors section of our website, www.danaher.com, under the heading Quarterly Earnings.

The audio portion of this call will be archived on the Investors section of our website later today under the heading Events & Presentations and remain archived until our next quarterly call. A replay of this call will also be available until February 11, 2021.

During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. The supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics refer to results from continuing operations and relate to the fourth quarter of 2020, and all references to period-to-period increases or decreases in financial metrics are year-over-year. We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets.

During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law.

As a result of the size of the Cytiva acquisition and its impact on Danaher's overall core revenue growth profile, we're representing core revenue on a basis that includes Cytiva sales. References to core revenue growth includes Cytiva sales in the calculation of period-to-period sales growth comparing the current period Cytiva sales to the historical period Cytiva sales prior to the acquisition.

With that, I'd like to turn the call over to Rainer.

Well, thanks, Matt, and good morning, everyone. Before we go through our fourth quarter and 2020 financial results, I wanted to take a moment and reflect back on the past year. As we all know, 2020 was a year that brought many unforeseen challenges as a result of the COVID-19 pandemic. While our contributions in testing, treatment and vaccination have helped with the global effort to combat COVID-19, there is still much more progress to be made to overcome the pandemic.

It's also not lost on us that part of our financial performance in 2020 was driven by the work we're doing to tackle a health crisis which has had such a devastating impact on so many around the world. That being said, we're also very proud of our contributions to fight the pandemic, and we'll continue to work tirelessly to support these global efforts in 2021 and beyond as necessary.

So as I look back on 2020, I'm most struck by our associates' teamwork, dedication and invaluable contributions during these difficult times. They are truly making a difference in the world. And since the onset of the pandemic, our team has met the challenges presented and turned them into impactful opportunities to help our customers, patients and the global community. Their efforts have been both humbling and inspiring.

I'd also like to recognize and thank our customers, suppliers and business partners, many of whom we called upon for additional support to continue meeting demand throughout this pandemic. We're incredibly grateful and won't forget their collective efforts over the past year. 1 of our 5 core values at Danaher is the best team wins, and I believe we truly saw that in action in 2020.

So with that, let's turn to our 2020 financial results. For the full year, we delivered nearly 10% core revenue growth, 170 basis points of core operating margin expansion, 43% earnings per share growth and over $5 billion of free cash flow. We also closed the largest acquisition in our history, welcoming the Cytiva team to Danaher in March of last year. Cytiva is a global leader in bioprocessing and has played a major role in supporting the development and production of COVID-19 vaccines and therapeutics. In 2020, the business generated more than 25% core revenue growth and over $4 billion of revenue. We couldn't be more pleased with Cytiva's early results, all driven by a highly talented, engaged and innovative team that has embraced the Danaher Business System.

So now let's take a closer look at the fourth quarter results. We generated $6.8 billion of sales with 15.5% core revenue growth and believe we continued to capture market share across many of our businesses through accelerated investment in new product innovation, enhanced commercial execution and by deploying new engagement techniques -- new customer engagement techniques during the pandemic.

COVID-related revenue tailwind contributed approximately 1,200 basis points to core revenue growth, while our underlying base business was up approximately 3.5%. Geographically, we saw broad-based and consistent revenue growth during the quarter. Developed markets were up mid-teens with similar growth in both the U.S. and Western Europe. High-growth markets were up low double digits, driven by another excellent quarter in China.

Our gross profit margin was 58.5%, and our operating profit margin of 23.7% was up 390 basis points, including 360 basis points of core margin expansion. Our outstanding margin performance was driven by a combination of higher core revenue growth and the impact of the Danaher Business System on productivity and operations across all of our platforms.

Adjusted diluted net earnings per common share of $2.08 was up 63% versus last year. We generated $1.9 billion of free cash flow in the quarter and $5.4 billion for the full year, up 134% and 79%, respectively. Our free cash flow to net income conversion was 149% for the full year and marks the 29th consecutive year this figure has exceeded 100% for Danaher. The combination of our cash flow generation and strong balance sheet gives us more degrees of freedom earlier than anticipated after the Cytiva closing and positions us well to actively pursue strategic M&A opportunities.

Given our strong margin and cash flow performance, we took the opportunity to accelerate investments in high-impact growth initiatives across Danaher, including innovation and collaboration projects. We're also expanding production capacity at Cepheid, Cytiva and Pall Biotech to support increasing demand for COVID-related testing and treatment while positioning the businesses for continued long-term growth.

So now let's take a more detailed look at our results across the portfolio. Life Sciences reported revenue increase as a result of the Cytiva acquisition with core revenue up 18.5%, led by core growth rates of 30% or more at Cytiva, Pall Biotech, Beckman Life Sciences and IDT. We continue to see strong demand from our biopharma customers during the quarter, and our non-COVID-related biopharma business was up double digits. And we also saw an acceleration in activity focused on COVID-19 vaccines and therapeutics. We also saw customers building out their genomics and automation capabilities to support the development and production of COVID-related tests and treatment.

In our more instrument-oriented Life Science businesses, order trends and installations improved as academic and research labs continued to reopen. SCIEX benefited from this uptick in activity and delivered mid-single-digit core revenue growth in the quarter, fueled by demand for new products such as the 7500 Triple Quad and the Echo MS.

Moving over to Diagnostics, reported revenue was up 23.5% with core revenue up 21.5%, led by more than 100% core growth at Cepheid, driven by elevated COVID-19 testing demand and GeneXpert systems placements. Cepheid achieved a significant milestone in December, surpassing $2 billion in annual revenue, just 1 year after hitting the $1 billion mark. It's a tremendous accomplishment by a fantastic team. Radiometer and Leica Biosystems, our acute care and pathology businesses, both delivered high single-digit core revenue growth. Declines at Beckman Coulter Diagnostics moderated as elective procedures and wellness checks steadily resumed through the quarter.

Moving to our Environmental & Applied Solutions segment, reported revenue was up 2%, and core revenue was up 1%. Our water quality platform delivered low single-digit core revenue growth, and product identification was down slightly. Across our water quality businesses, we saw solid demand for our consumables and chemistries as we continue to support customers' day-to-day, mission-critical water operations. Equipment declines moderated as more customer facilities got back up and running. And by end market, municipal activity and projects continued to resume and industrial declines moderated.

ChemTreat delivered its 52nd consecutive year of core revenue growth in 2020, an impressive accomplishment in any year, but even more so given the unprecedented challenges presented by the pandemic. Across our water quality platform, the team's focused execution, combined with our innovative offering and the positioning of our portfolio, enabled the water quality platform to achieve positive core revenue growth for the full year.

At our product identification platform, positive results in our marking and coding businesses were offset by moderating declines in packaging and color management. Consumables and services held up well globally as we continued to help customers keep their essential businesses operating through the pandemic.

So with that as context for what we saw by segment during the quarter, let me give you some color on the trends we're seeing across our end markets and geographies. Customer activity around the world remains broadly consistent with what we saw back in October and through the fourth quarter, and we expect this relative stability to persist near term. Despite rising COVID infection rates and new targeted lockdowns in certain regions, customers are adapting to working in this new pandemic environment, and we have not yet seen a material impact on demand.

Within Life Sciences, COVID-19 vaccine and therapeutic activity continues to drive record bioprocessing demand. Cytiva and Pall Biotech comprise most of our bioprocessing exposure, and their combined order growth in the quarter was up more than 50%. As a market leader across the bioprocessing workflow, our teams are playing a significant role in the development and production of COVID-19 vaccines and treatment while working to ramp up manufacturing capabilities on a massive and very compressed time line.

We are involved in the majority of more than 400 vaccine and therapeutic projects underway globally, including all of the vaccines in the U.S. that have recently received FDA Emergency Use Authorization or are in late-stage clinical trials. We're very proud of our team's tireless efforts, which will directly impact the lives of so many people around the world.

From where we stand today, we estimate that 2021 revenue opportunity associated with COVID-related vaccine and therapeutics at Cytiva and Pall Biotech will be approximately $1.3 billion, roughly twice the amount we recognized in 2020. Non-COVID-related bioprocessing activity remained strong and in line with what we saw over the last several quarters.

Turning to our other Life Science end markets. And as I mentioned earlier, academic and research labs are continuing to reopen, albeit at reduced capacity as social distancing measures limit the number of people in the lab at any one time. In clinical diagnostics, heightened demand continues for molecular testing in both hospital lab and point-of-care settings. Since launching the first rapid molecular test for COVID-19 in March, Cepheid has meaningfully increased production capacity and shipped approximately 9 million test cartridges in the fourth quarter. As anticipated, approximately 60% of the respiratory tests shipped in the fourth quarter were COVID-only tests and 40% were 4-in-1 combination test for COVID-19, Flu A, Flu B and RSV.

The team also placed a record number of new systems in 2020, increasing Cepheid's installed base by more than 35% year-over-year to over 30,000 instruments globally and reinforcing its market-leading position in molecular diagnostics. Cepheid's differentiated offering and leading presence at the point of care position the business to help meet customers' testing needs in 2021 and beyond. As a result of this strong positioning and the elevated COVID-19 infection and hospitalization rates we are still seeing today, we expect to ship at least 9 million tests per quarter for the duration of 2021.

Across hospital and reference labs, patient volumes remain steady as elective procedures and wellness checks continue at a similar pace as we saw through Q4. We're closely monitoring patient activity in areas that have recently implemented new lockdowns, but we've not seen any material impact at this point.

During the quarter, Beckman Coulter Diagnostics expanded its COVID-related test menu with the addition of a high-volume antigen test. This automated test is designed to run on Beckman's immunoassay analyzers and can help address the challenges associated with scaling up antigen testing to make higher-volume mass testing possible. Beckman's automated antigen test is another important addition to our COVID diagnostics offering and a testament to the Beckman team's strong cadence of innovation, having launched 6 new COVID-related tests in as many months.

Finally, in the applied markets, consumables remain solid as customers sustain essential businesses -- business operations like testing and treating water and safely packaging food and medicine. And we're encouraged to see sequential improvement on the equipment side as customers initiate new projects and capital investments.

Looking ahead now to the first quarter and full year 2021. We expect to deliver mid- to high-teens core revenue growth in the first quarter. We anticipate that COVID-related revenue tailwinds will contribute approximately 1,300 basis points to core revenue growth with mid-single-digit core revenue growth in our non-COVID-related businesses. For the full year 2021, we expect to deliver low double-digit core revenue growth, with growth moderating sequentially in the second half of the year as a result of tougher prior year comparisons. We anticipate that COVID-related revenue tailwinds will contribute approximately 500 basis points to core revenue growth for the full year with mid to high single-digit core revenue growth in our non-COVID-related businesses.

So to wrap up, 2020 was an exceptional year for Danaher. Our team took the challenges presented by the pandemic and turned them into opportunities to support customers across all of our businesses and also directly contribute to the fight against COVID-19. We're all humbled by our associates' efforts and believe that Danaher's future is bright, thanks to their dedication.

2020 was also a transformative year for Danaher with the addition of Cytiva. This was one of several strategic portfolio moves we have made over the last few years to build a better, stronger company and establish Danaher as a global science and technology leader. Looking ahead, we believe the combination of our talented team, excellent portfolio of businesses and strong balance sheet, all powered by the Danaher Business System, position Danaher to outperform in 2021 and beyond.

So with that, I'll turn the call back over to Matt.

Thanks, Rainer. That concludes our formal comments. Maria, we're now ready to take questions.

(Operator Instructions) Our first question comes from the line of Tycho Peterson of JPMorgan.

Nice quarter. Rainer, I'm curious if you could talk about the sustainability of the Pall, Cytiva order book as you lap tougher comps. I know you talked about the $1.3 billion in revenues tied to COVID vaccines. But question is more on kind of the order book and then time lines for the manufacturing capacity expansion you alluded to.

Sure. Tycho, so in terms of the sustainability of the order book, the way we're thinking about this, and we've mentioned this at JPMorgan as well, it's about -- we're looking at a backlog here of about $1 billion coming into the first quarter. And we expect the total year to have COVID-related sales of about $1.3 billion. And that's really based on the approved vaccines that we see out there in the marketplace as well as the volumes that we see related to clinical trials as it relates to other vaccines. So we think that we have good sustainability and strong backlog here to be able to make sure that we cover that $1.3 billion.

Additionally, coming back to your capacity point, we have been expanding capacity continuously. Even prior to the close of the transaction, we had agreed with GE to continue capacity expansion. We have then, after the close, continued to invest, whether that's at Cytiva, Pall Biotech or elsewhere, in order to make sure that we're able to meet our customers' demand. And that will continue to occur here through the year 2021 and beyond.

Okay. And then for McGrew, one on just the margin dynamics here. As we think about Cepheid's 9 million tests a quarter and then Cytiva, Pall continuing to kind of trend at these levels, what are the margin implications between these 2 tailwinds in your view for the year?

Yes. I mean, Tycho, I think maybe the way to think about it is that it helps to kind of sustain a similar margin profile than what we've seen before. So maybe if you think about kind of from a fall-through perspective on the core growth here for 2021 and, frankly, for Q1 as well, we're sort of assuming we're going to see about a 40%-or-so fall-through for, like I said, for both Q1 and 2021.

Now that's down slightly from what we've been seeing in the last couple of quarters, but I think we want to kind of stay aggressive in what we've been doing on the growth investment side, one. And two, we are starting to see a little bit of inflationary pressure, particularly around kind of freight and a little bit in the supply chain as well.

And then China also is -- we've got some targeted lockdowns, as you know, now. But in the fourth quarter, we really saw China sort of having intercountry, if you will, travel be pretty significant. They're moving around quite a bit and getting back at it. So I think we're sort of thinking instead of maybe the levels of fall-through we've seen, it might be more like 40%. But again, I think we'll be able to hopefully sustain something like that given what you talked about, which is a pretty good margin profile of both those businesses that will continue to be pretty strong here next year.

Okay. And if I can ask one more before I hop off. Just on M&A, Rainer, it seems like you're telegraphing a desire to do something more meaningful. And any incremental comment you could provide on willingness to do a larger transaction and any framework you can talk about?

It's great to be able to talk about M&A here in January of 2021, having just closed the Cytiva deal. And no question, between the better performance that we've seen out of Cepheid, the -- I'm sorry, Cytiva, as well as the equity raise that we've done and the free cash flow that we've seen, we definitely see more degrees of freedom here earlier than we've had. But we still have work to do here with Cytiva, standing them up as an operating company. And we'll always be in the game, but likely more focused on smaller to midsized deals here for now.

Our next question comes from the line of Derik De Bruin of Bank of America.

So just -- I guess just following up on Tycho's question on the margins and just sort of thinking about the bottom line, I mean, you didn't give an EPS guidance for 2021. But I mean, is there any reason to think that something in that $1.90 to $2 range on a quarterly basis isn't sustainable for the rest of the year?

Well, I mean I think I'd probably -- Derik, I think I'd kind of go back to take your 40% VCM and the fall-through and whatever revenue assumptions you sort of put in, I think the math would -- the math will kind of take care itself on it.

Okay. And just sort of looking at some of the -- just I guess, looking at some of the -- one of the big questions that's coming up in the -- from investors is thinking about instrument placements in the diagnostics area. I mean, obviously, there's been -- not only has Cepheid placed a ton of instruments, but a lot of your -- one of your competitors, all the other companies selling molecular diagnostics tools have placed enormous numbers of instruments. Are you worried that there's going to be a glut of machines out there that don't get used? Or are you being very selective in sort of like where you're placing it? The question is like what's the -- what's going to be the follow-on demand once you're sort of past COVID for your installed base?

So our instrument placements, as we think about Cepheid, we have placed now and have an installed base of over 30,000 instruments, right, growing that over 35% here in the year 2020. And we've been very thoughtful about the placement of those instruments, first of all, and helping here during the pandemic and making sure we have those at the point of care where diagnostic decisions are being made. And the answer has to be fast and it has to be right, and the Cepheid GeneXpert is just the perfect solution for that.

At the same time, we've been thinking about those placements for the long term. You may be aware that Cepheid has the largest molecular diagnostic menu in the U.S. with over 20 tests and outside of the U.S. with over 30 tests. And so we've placed those instruments primarily there where we see that, even in a post-COVID world, they would find great utilization based on the full testing menu.

Great. And then just one cleanup question or just one follow-up question. How should we think about the EAS segment in 2021?

So the EAS segment has been improving sequentially here throughout 2020. And we're really pleased with the fact that water quality, in particular, has had positive growth, but also PID was essentially flat here in 2020 as well. And so we see that recovery, and we will continue to see that recovery here as we go through 2021 and expect them to be in the mid-single-digit range, not only as the consumables remain solid as they have been, but as those instrument placements, which had been in moderate decline -- had moderating decline, start picking up as we see these customer projects in our funnels.

Our next question comes from the line of Vijay Kumar of Evercore ISI.

Congrats on a solid print here. Rainer, maybe I'll start with -- some of the base businesses here, right, the assumptions here for the guide in a base business, mid-singles. Obviously, the comps were pretty easy in '20 given the disruptions. And I look at the Q1 guide here, mid to high teens. You guys just did mid-teens, inclusive of 5-days impact. I mean correct me if I'm wrong, it feels like the base business is accelerating here. Life Science, particularly, it seems to be growing double digits in the back half of '20. I'm curious what's driving that acceleration in base Life Sciences in the back half of '20 and why is the guide assuming mid-singles for '21.

So Vijay, that's right, I mean, we have seen a sequential acceleration of our more instrument-related Life Science businesses as labs have continued to open. They've been able to work out their social distancing protocols. They're not up to full capacity yet, but they certainly have been improving, and that's given us more lab access to continue installations and, of course, brings the service business back online. So that's been continuously improving, and we would expect that trend to continue here in 2021.

Now as we think about the guide here, mid to high teens, look, we have our base business there at mid-single digits, which is 100, 150 basis points acceleration, as well as the COVID tailwind accelerating here to 1,300 basis points. So we think we're well placed there. And just as a reminder, we've got a couple of working days less also in the first quarter of 2021.

And then lastly, as it relates to the COVID tailwinds, keep in mind that Cepheid already last year in the first quarter had a very strong quarter as the physicians were trying to rule out flu, if you will, with more flu testing in the absence of an actual COVID test.

That's extremely helpful, Rainer. One for Matt. Matt, the -- I know you said the 40% incrementals, we can do the math. But I just want to clarify, apologies, I'm getting to north of 28% operating margins for fiscal '21. Does it seem ballpark -- in the right ZIP code for you guys?

Yes. I mean, again, it's -- there's not much -- if you think about the fall-through at kind of 40%, there are some moving pieces here below the line, but they largely offset each other. So I mean I think it's pretty straightforward. But whatever your revenue assumptions are going to be, that should be a pretty good way to think about -- wherever you land on that, I think, will dictate where you come out on the bottom, for sure.

Got you. And then, Rainer, one quick one for you, please. On the high-volume antigen test, is that -- I know you sort of mentioned in your press release about screening opportunity. Is that an upside in the model here for the guide? Or how should we think about high-volume antigen test?

So the high-volume antigen test, you're right, we just launched that here in December. And in fact, that will be available on our installed base of about 16,000 instruments. So it is a broadly applicable test for us here in our installed base at Beckman.

Having said that, we've been very moderate in our planning assumptions here as it relates to including higher volumes of antigen test until it becomes much clearer how those will be applied here, not just under the Biden administration in the U.S., but throughout the world as people start setting standards as to what the test results for antigens mean from a diagnostic perspective, but also in terms of how you might think of large-volume serial testing for schools opening up and other institutions.

Got you. Congrats again guys on an impressive print here.

Thanks, Vijay.

Our next question comes from the line of Scott Davis of Melius Research.

A couple of nitpicky questions. On E&AS, is there a meaningful difference between the incremental leverage on the recovery in water versus Product ID?

Not really, Scott. Those businesses are pretty similar from a fall-through perspective.

Like 35% to 40%, ballpark?

I think that's a good place to be.

Okay. And then when you guys were thinking in terms of like the 4-on-1 versus -- the 4-in-1 take rates, the 40% number, is that kind of uniform around different geographies? Or is there particular higher take rates in different geographies around the world?

Scott, so it actually does differ by geography. Let me see if I can do something about this echo here. Can you hear me okay now?

I can hear you fine.

Okay. So it does differ by geography. Particularly in the U.S., you are looking at 60% COVID-only and 40% of the 4-in-1. In Asia, in fact, there's a real preference for the COVID-only test as the flu is just not as prevalent there and it's seasonal. As you go to Europe, here, we're increasing adoption of the 4-in-1, but that's a little staggered there as the improvement by country roll in.

Our next question comes from the line of Doug Schenkel of Cowen.

Maybe just a quick follow-up on an earlier guidance question. It looks like you're assuming a 2-year, stack-based business growth of around 5%. That doesn't seem to imply a full recovery as we think about the steady state for your portfolio. So just to be clear, and I think we know the answer to this, but I just want to confirm, it seems like the philosophy for this year embeds some assumption for continued recovery in line with recent trends and based on backlog, but not a full reopening over the course of the year.

Doug, that's exactly how we're thinking about it. We are still in the middle of the pandemic, as we all know. And while we're hopeful that things get better as the vaccines roll out and the adoption there improves, we are not expecting 2021 to be a year that is, if you will, a post-COVID herd immunity year. This is going to continue to be a transition year and probably not quite back to the pre-COVID rate.

Okay, super helpful. Pivoting quickly back over to Cepheid, I believe, Rainer, that you said the guidance assumes Cepheid should continue to sell around 9 million assays per quarter in 2021. It doesn't seem like that's reflecting any potential capacity increases. I just want to make sure that's the case. And if so, why? And then kind of building off of that, is the expectation that the mix of kind of COVID-only and 4-in-1 test will remain kind of in that 60-40 ratio?

Okay. So let's start with the first one. As you may know, we, in Q2 of last year, shipped 6 million; 7 million in Q3. We were planning to ship 8 million cartridges here in Q4, and we're able to exceed that by shipping 9 million. So as we think about our capacity improvements, which we continue to work on, we do not yet have those in place. And in view of the pretty dynamic situation also as it relates to the actual pandemic, we think it's a good planning number to take the 9 million cartridges here per quarter for the full year. And of course, as we continue to work on and we are working on and investing in capacity increases, we'll provide further updates.

Now in terms of the mix, I think that is a good planning assumption the way you're thinking about that with 60% COVID-only test and about 40% of the 4-in-1 test. That's how we're thinking about it as well.

Okay. Just one last one. I just wanted to dig in on your commentary regarding capacity expansion within bioprocessing. Presumably, at some point, you're going to be well positioned to transition the building COVID-19 capacity over to other large molecules. You were building that out even in advance of the pandemic, as you mentioned in your prepared remarks. So do you think that bioprocessing revenue can be sustained at 2021 levels even when we look forward to the day where vaccine and therapeutic tailwinds related to COVID-19 abate? Is -- do you think there's an air pocket or a sustainable demand and trends enough to support revenue at least at 2021 levels?

Well, we look at that pipeline of drugs that are -- and vaccines, so therapeutics and vaccines, that are not COVID-related as well. And it's chock-full, it continues to grow and that business has been very, very solid. So there's a couple of things here, Doug. One, we expect that pipeline to be very relevant to the capacity that's being created today. In fact, many of our investments are merely pulling forward things that we had planned for several years down the road. That's kind of one point.

But the second point is that it also looks as though vaccine manufacturing will be with us for some time, not only as it relates to COVID, but as you think about the bolus of investment that has now gone into biotech companies that are looking at new vaccine technologies to get at diseases where we've yet to develop vaccines. We do see increasing number of projects there as well. So as it relates to this incremental capacity, we feel really good about where we're positioned. We've got the right portfolio, and we think our utilization is going to be very strong.

Okay. Oh, sorry. Sorry, Matt.

Yes, maybe just to give you -- yes, just to give you a little bit of color around kind of the capacity side and maybe tying that back to how we're thinking about the sustainability of what we're seeing today, I mean I think, as Rainer said, as everything he just kind of laid out, when you think about what we've seen in the core-based biopharma business, we've seen the last 3 or 4 quarters here where we've got a low double-digit kind of core growth. And that's even probably a little bit above where it was a couple of years ago, given everything Rainer just said.

Then when you put on top of that what we've seen here on the vaccines and therapeutics, still a lot of unknowns obviously going forward, but you're looking at -- as we talked in Q2 and Q3, I mean the order growth at Cytiva was well north of 50%, and it was north of 50% again in Q4. So I mean I really think we've got good sustainability as we head into '21, given the backlog, given what we saw in order growth in Cytiva in Q4 and given the base business sort of going low double digits.

Our next question comes from the line of Steve Beuchaw of Wolfe Research.

I actually wanted to rewind almost all the way back to the beginning of your prepared remarks, Rainer, and a point that you made about accelerating investments in innovation and collaboration. It's one of the sort of high-quality problems that has emerged for companies that are part of the solution around COVID. I wonder if you could talk us through how you've gone about identifying areas to make those investments. And if you could flag for us any particular areas of emphasis, I'd really appreciate it. And I do have one follow-up.

Thanks, Steve. So the way we've been thinking about these growth investments is very broad across our portfolio. We've always looked at this as an opportunity to strengthen our capabilities and exit the pandemic stronger than we entered, whether that's in businesses that have -- that are benefiting from COVID tailwinds or businesses that are not in that particular application.

And so what we do is we work together with our teams to identify where the most attractive projects are, not just on a return perspective here in the near term, but also strategically positioning us for competitive advantage, and then we will invest aggressively in those. And that's been the case here for several quarters now. So we'll continue to do that.

Okay, much appreciated. And then look, a lot of good questions have been asked about margins, earnings and the businesses. I'll try to round it out a little bit and just ask about core Beck Dx. I wonder if you could give us perspective on where you are with the DxA rollout in the replacement cycle and to what extent COVID has impacted that. I could see it having some puts and takes. So any perspective on how that's going and what you're thinking about core Beckman for -- core Beck Dx, I should say, for '21, would really appreciate it.

We -- maybe I'll -- oh, sorry, go ahead, Rainer.

Yes, I was just going to say, I mean we just launched the DxA, and we couldn't be more pleased with the initial interest in that. But if we back up to the Beckman Diagnostics business for a second and see how that's been performing, we've continued to see sequential improvements here quarter-over-quarter in practically every region. And I couldn't be more pleased with the way, in fact, that business is positioned.

You were speaking earlier about these kinds of growth investments that we're making. Well, we've just launched the hematology analyzers along with the DxA, so the DxH 9000 and 5000 (sic) [DxH 900 and 500], as well as just launched 6 new COVID-related tests. So that's just an example of your first question also as it relates directly to Beckman Dx. So we've been tracking exactly what we wanted to hear with the DxA, and that's been really going well for us.

Matt, did you want to add anything there?

No. Yes, I just wanted to sort of address the question of what we thought they'd do from a growth perspective here in '21. And I think we're sort of thinking that as the rebound continues a little bit with the patient volumes, we expect them to be up sort of high single digits here for the year.

Our next question comes from the line of Jack Meehan of Nephron Research.

I was wondering if you could give a little bit more color on expectations around capital equipment. So you obviously ended the year on a strong note. But just given some of the recent flareups, do you think that sustains as you go into the first half of the year?

So Jack, you're right, we have seen capital equipment purchases picking up here. As labs open up, that's increased, and then we closed very strong here. We saw that in many of those instrument-type businesses in the end of Q4 with some high single-digit performance there. So -- and in fact, we continue to see that. We've pulled our businesses and customers, and they're learning to work around the pandemic with the necessary social distancing measures, and we continue to see that accelerating here going into 2021. And we see that also reflected in our guide here for both Q1 as well as the low double digits for 2021.

Great. And then I know you've given a lot of color already on bioprocessing, but one follow-up just on the expectations built into the guidance. So you have it roughly doubling to $1.3 billion from COVID tailwinds in 2021. But that kind of looks like you're annualizing the benefit you saw in the second half. So is there anything -- maybe just talk about how you see the demand playing out throughout the year. And is there anything tailing off maybe on the therapeutic side? What are you assuming there?

So as we think about the bioprocess order book, recall that we had orders growth at Cytiva and Pall Biotech of over 50% here in Q4, and that was a further acceleration from what we had seen. And we expect that acceleration here to continue. So our backlog position is really strong. We entered the year with $1 billion and are confident that, that $1.3 billion of revenue are really solid.

But that also has some assumptions behind it, which is here we are supplying the approved vaccines as well as those that are in clinical trials. And you know we're well positioned not just on the vaccine in project Warp Speed, but the over 400 projects that you have, both vaccines and therapeutics. So as you think about 2021, while we do expect the moderation in the second half of the year, that's entirely related to more difficult comps as opposed to a trailing off of the actual absolute demand. So we continue -- we believe that, that will continue.

To give you some sense, Jack, on what -- on how the order book is going to flow through, I mean we saw in Cytiva and Pall Biotech, in the second half of the year, we grew, call it, north of 35%. We've got that backlog position now. Now of -- like you said, some of it came in during the year and booked and shipped in the year to give us the 35%. But we're going to get off to a pretty good start here at Cytiva. Q1 core growth in Cytiva is going to be probably north of 50%. So I think we'll have a good strong start. Let's see how that order book sort of develops through the year as more vaccines and therapeutics sort of make their way through the systems to the approvals, but that's sort of how we've framed it as we stand now with kind of the $1.3 billion opportunity.

And ladies and gentlemen, we have time for one more question. Our final question comes from the line of Patrick Donnelly of Citi.

Maybe just a quick one, more high level on a geographic basis. China, I think, was low double digits in the quarter on a core growth basis. Can you just talk about the pace of recovery there, which markets are growing strongly and then also just the expectations kind of baked in for '21 on that front?

Sure. So as you say, we did see a very nice recovery in China here both in Q4 as well as what we're planning here going forward. So low double digits in China in 2020, and that's really across the businesses. So we saw that both in our Life Science and Diagnostics businesses as well as in EAS as China has really ramped here, not just in the health care sort of related businesses, but also in the applied market.

Now as we look forward to 2021, starting with Q1, we expect our businesses to be over 50% in China in terms of the growth in Q1. So really getting out of the gates there very strongly. Of course, they had a lower comparison there in Q1 of 2020. And as we think about the full year, we really see China in the mid-teens. So very solid performance, very strong recovery after a full year which really came in at the low single digits. So 2020, China, low single digits; 2021, mid-teens, speaks to a strong recovery there.

Okay. That's helpful. And then maybe just one more on Cepheid. I know it's been touched on a few times. But I guess as you think about kind of the sustainability of that 9 million a quarter, how are you thinking about the overall, I guess, COVID testing market in the back half? I mean are you assuming that shrinks and Cepheid gets a bigger piece? And then on the back of that, do you see point of care becoming more and more important as we go here and maybe this ends up being a positive inflection point for this as a piece of the market on the go forward?

Sure. So looking to point of care here and COVID testing in general for the second half, it's very hard to forecast right now how COVID testing will play out in the second half just because as we think about vaccines rolling out, we're already now talking about a variant. Who knows how many more of those will occur? And of course, often, the dialogue tends to be about what's happening in the U.S. But in fact, other places around the world are not vaccinating yet at that rate or even don't have vaccines yet. So we think that, that planning assumption of 9 million per quarter is a very solid planning assumption.

And then as it relates to Cepheid, in particular, at the point of care, you may have heard this concentric circle metaphor, but point of care is really at the center of that in terms of the durability of that testing for the long term because that's where the doctors need fast turnaround time. That's where they need an accurate result because they're going to make a therapeutic decision. They're going to make a decision as to what happens next. And the outer portions of those concentric circles are the ones that have increasingly less durability as the general public becomes vaccinated. And over time, although it's going to be interesting to see whether that's achieved in the second half of the year, whether herd immunity is even relevant. Keep in mind, herd immunity is not something that happens in a country. The whole world is a petri dish here. And if we continue to travel and interact with each other, there is a high likelihood that high testing volumes will continue for some time.

And that was our final question. I'd like to turn the floor back over to management for any additional or closing remarks.

So thanks for...

Thanks, everyone, for joining us...

Oh, go ahead. Go ahead, Matt.

Thanks, Rainer. Thanks, Matt. Thanks, everyone, for joining us here today. And we're around all day for questions.

Thanks, everybody. Thanks, Maria.

And thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect.