Danaher Q1 2022 Earnings Call Transcript

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Provided by Quartr
April 21, 2022

Key Takeaways

  • Danaher delivered a strong Q1 performance with 12% core revenue growth (8% base business growth, 4% from COVID testing), adjusted EPS of $2.76 (+9.5% YoY), $1.7 B in free cash flow, and a 61.2% gross margin.
  • Life Sciences & Bioprocessing achieved high single-digit core revenue growth (low double-digit ex-one-time project), driven by robust demand for mAb, cell & gene, mRNA programs and biosimilars, and supported by new single-use technology capacity in Wales, South Carolina and Beijing.
  • Diagnostics revenue rose 22.5% (Cepheid +50%+) with non-COVID testing up mid-single digits; mix shifted toward combo respiratory assays (65% of cartridges) as patients return for wellness and elective procedures.
  • Environmental & Applied Solutions core growth was 6.5%, with ChemTreat scoring its fourth straight quarter of double-digit gains and Product Identification delivering high single-digit growth across marking, coating and packaging.
  • For Q2, Danaher expects mid-single digit core growth (200–300 bps headwind from China lockdowns) and reaffirmed full-year guidance of high single-digit core growth, anticipating China recovery by end of June.
AI Generated. May Contain Errors.
Earnings Conference Call
Danaher Q1 2022
00:00 / 00:00

There are 9 speakers on the call.

Operator

Good day. My name is Leo, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Danaher Corporation's First Quarter 2022 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. Hallum.

Operator

After the speakers' remarks, there will be a question and answer session. Harcourt. I will now turn the call over to Mr. John Bedford, Vice President of Investor Relations. Mr.

Operator

Bedford, you may begin your conference.

Speaker 1

Good morning, everyone, and thanks for joining us on the call. Call. With us today are Rainer Blair, our President and Chief Executive Officer and Matt McGrew, our Executive Vice President Hercologist 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 Resources 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 Webcast on the Investors section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call.

Speaker 1

Hercology. A replay of this call will also be available until May 5, 2022. Hercology. During the presentation, we will describe certain of the more significant factors that impacted year over year performance. Co.

Speaker 1

Supplemental materials describe additional factors that impacted year over year performance. Call. Unless otherwise noted, all references in these remarks and supplemental materials, the company's specific financial metrics Call. Relate to the Q1 of 2022 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 Hercology, or are available only in certain markets.

Speaker 1

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

Speaker 1

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

Speaker 2

Well, thank you, John, and good morning, everyone. We appreciate you joining us on the call today. Hercology. We're off to a good start in 2022 with the Q1 coming in ahead of our initial expectation. Hercology.

Speaker 2

The team navigated a challenging operating environment to deliver strong revenue, earnings and cash flow growth. Hercology. And our performance was broad based with high single digit or better core revenue growth in each of our three segments. Hercology. During the Q1, we continued to strengthen our competitive advantage through high impact growth investments in innovation and bioprocessing production capacity, Hallum.

Speaker 2

Both of which we believe are contributing to market share gain. Now clearly, our well rounded results are really a testament to our team's commitment to continuous improvement and to the unique positioning of our portfolio. We just have an exceptional collection of businesses, all powered by the Danaher Business System that serve attractive end markets with durable, Secular Growth Drivers. And it's this combination that differentiates Danaher today and provide a strong foundation for the future. So with that, let's turn to our Q1 results.

Speaker 2

Call. Sales were $7,700,000,000 in the Q1 and we delivered 12% core revenue growth. Our base business was up 8% with broad based strength across the portfolio and COVID-nineteen testing contributing 4%. Geographically, revenue in both the U. S.

Speaker 2

And Western Europe grew mid teens, call. While high growth markets were up low single digits, China declined low single digit, but was up Call. High single digit excluding the impact of a previously called out significant bioprocessing project delivered in the prior year. Hercology. The COVID-nineteen driven lockdowns that began in late March had a very modest impact on our Q1 results in China.

Speaker 2

Call. However, as these lockdowns extend further into April, we're seeing more of an impact in our businesses. And we anticipate the situation will begin to ease Hallum in the coming weeks with an eventual return to normalized activity levels by the end of June. Hercology. Our gross profit margin for the Q1 was 61.2%.

Speaker 2

The operating margin decline of 80 basis points to 28 Partners. 1 point 3 percent is largely due to year over year changes in foreign currency exchange rates and product mix primarily within our Life Sciences Hercology. Now adjusted diluted net earnings per common share of $2.76 We're up 9.5% versus last year and we generated $1,700,000,000 of free cash flow in the quarter. Call. So now let's take a look at our results across the portfolio and give you some color on what we're seeing in our end market today.

Speaker 2

Hercology. Let's start with life sciences, where reported revenue grew 9.5% and core revenue was up 7.5% with broad based Herbst. In bioprocessing, we're seeing very robust activity levels. Customers are accelerating their Partners in Research and Production across all major therapeutic modalities. Core revenue in our bioprocessing business at Cytiva and Paul Biotech grew high single digits and was up low double digits excluding the impact Herr Of that significant one time project in China last year.

Speaker 2

The orders remain very healthy and we continue to build backlog across who will be joining us today. Now over the last 2 years, our customers prioritize the development of COVID-nineteen vaccines and Therapies to rapidly accelerate their time to market. Today, these programs require less investment in manufacturing capacity as they mature and become a part of our customers' core business. And as a result, our customers are starting to reallocate resources Call. Back to previously paused and new programs for other modalities, notably monoclonal antibody based therapies or MAb, Cell and gene therapies and mRNA based technology.

Speaker 2

In bioprocessing today, Monoclonal antibodies are the largest investment area for our customers as they're becoming the standard of care in the treatment of many diseases. Call. Customers are adding manufacturing capacity to support both novel Mab in clinical trials and the rapid growth of approved treatment. Call. Biosimilar development and production are also increasing as patents on higher volume therapies expire.

Speaker 2

Call. This trend is making life saving treatments more accessible and helping to accelerate adoption in underserved markets. Hercology. Now we continue to make substantial investments in manufacturing capacity to help meet our customers accelerating demand in bioprocessing. Hallum.

Speaker 2

An important focus area of our expansion has been with single use technology, which are key enablers to scale the development and manufacturing Welch Biologic and Genomic Based Medicine. In this Q1, our newest plant dedicated to the manufacturing of single use technology Herr. Herr:] came online in Cardiff, Wales. Now this plant along with recently opened facilities in South Carolina and Beijing are critical to Herb. So turning to our life sciences instrument businesses, we're seeing who will be joining us today.

Speaker 2

Demand is particularly robust at our pharmaceutical, CRO and academic research customers Hercology. In the Q1, Leica Microsystems, IVT and SCIEX each grew over 10%. Hercology. At SCIEX, the XenoTop 7,600 and Triple Quad 7,500 continue to perform well and are great examples Hercology. At Leica Microsystems, Mika is another example of impactful innovation for our customers.

Speaker 2

Mika integrates wide field and confocal imaging in a single instrument, while leveraging machine learning and automation to dramatically simplify the imaging workflow for our researchers. So clearly, across the life sciences portfolio, We're investing in innovation to bring meaningful solutions to our customers and to strengthen our competitive position. Aldebaran continued its great start as a part of Danaher, delivering over 40% growth in the Q1. Since joining Danaher in late August, the team has embraced the Danaher Business System and is putting DBS tools to work. Call.

Speaker 2

Recently completed Kaizen event, which focused on increasing throughput and further reducing lead times are already generating terrific results. So we're excited about the early progress at Aldevron and thrilled with the great work the team is doing. Now let's move to diagnostics where reported revenue was up 21.5% Call. And core revenue grew 22.5 percent led by over 50% growth at Cepheid. Hercology.

Speaker 2

Our non COVID clinical diagnostic businesses collectively grew mid single digits. Notably, Leica Biosystems delivered their 7th consecutive quarter of double digit order growth driven by strength in core histology, advanced staining and Digital Pathology. In clinical diagnostic market, volumes remain in healthy levels Hallum. In most geographies, as patients are returning for wellness checks, routine screenings and other elective procedures, Call. Our customers are effectively managing through periodic outbreaks by adapting their protocols and procedures, Allowing them to continue providing critical healthcare services.

Speaker 2

Now in China, we're currently seeing regional lockdowns impact patient volumes and call. In molecular diagnostics, Respiratory testing volumes have moderated globally as the omicron outbreak has subsided in most regions. Hercology. Our demand for Cepheus testing at the point of care remains very strong and we believe we're taking market share. Hallum.

Speaker 2

Our continued growth and share gains are testament to the significant value of the unique combination of fast, Hercology. So as COVID-nineteen moves towards an endemic disease state, we're seeing increased demand for Cepheid's broader test menu. Hallum. In the Q1, non respiratory testing revenue grew double digits led by hospital acquired infection, Horology and Infectious Disease Testing. Customers, including several who initially purchased our GeneXpert system for COVID-nineteen testing Herr.

Speaker 2

Our expressing increased interest in expanding their menu utilization. As our customers free capacity from respiratory testing, We believe there are significant opportunities to leverage our market leading installed base and testing menus to drive broader utilization and demand Herr. Co. Revenue of $900,000,000 in the quarter exceeded our expectations as customers showed an increased preference for Cepheid's Coron 1 combination test during the respiratory season. Our combination test for COVID-nineteen flu B and RSV call.

Speaker 2

Represented approximately 65% of the 17,000,000 respiratory cartridges shipped in the quarter with COVID only tests accounting for approximately 35%. So now let's move to our Environmental and Applied Solutions Hallum segment, where reported revenue grew 2.5% with core revenue up 6.5%, including Call. Water Quality and Mid Single Digit Growth at Product Identification. At Water Quality, Hallum. ChemTreat delivered its 4th consecutive quarter of double digit core growth.

Speaker 2

Accelerating demand for our analytical chemistries and consumables Hercology. Equipment order rates also remain strong as customers are continuing to invest in larger municipal projects. Hercology. Now product identification, our marking and coating business was up high single digits, partially offset by slight decline Call. In our Packaging and Color Management business, Videojet was up high single digits with strong demand in food, beverage and industrial end markets.

Speaker 2

So stepping back, our water quality and product identification platforms have done an exceptional job of leveraging the Danaher business system to improve their positioning both from a cost and growth perspective. Hercology. While supply chain pressures have been modestly more pronounced than EAS, our teams are using DBS tools Such as daily management to work with suppliers and ensure production component availability. We're also using visual project management Call to help us reengineer our products faster with a focus on moving from difficult to source electronic components to newer, more cost effective next generation chipsets. Now we believe DBS enables us to deliver faster Hallum.

Speaker 2

Now our teams are also using DBS growth tools to accelerate innovation and deliver more impactful solutions to the market. Innovations such as Videojet's CIJ-eighteen eighty printer and Hawk's Hallum. HQ Series Portable Meters are helping our customers solve the many challenges they face from increasing regulatory requirements Hubert. And we're seeing the impact in our core growth, which has averaged mid single digit annually over the past 10 years Herr So we believe this combination of the rigorous application of DBS tools paired with our proactive growth investments So now let's briefly look ahead to our expectations for the Q2 and the full year. Hercology.

Speaker 2

In the Q2, we expect to deliver mid single digit core revenue growth in our base business, call, which includes a headwind of approximately 200 to 300 basis points from the ongoing COVID-nineteen related shutdown in China. Hercology. For the full year 2022, there is no change to our previous guidance of high single digit core revenue growth in our base business Hallum as we expect the shutdowns in China to normalize as we move through the remainder of the year. Call. We continue to expect both the low single digit core growth headwind from COVID-nineteen testing and overall mid single digit core revenue growth.

Speaker 2

So to wrap up, we had a good start to the year and look forward to building on this foundation as we move through 2022. Our first quarter results are a testament to the dedication of our outstanding team and their commitment to Danaher Business System. And these results also reflect the unique positioning of our portfolio and the exceptional collection of high quality franchises that comprise Danaher today. We believe the durability of our businesses Hallum, where consumables now represent 75% of revenue positions us exceptionally well in today's Partners. So this powerful combination of our talented team, The strength of our portfolio and the Danaher business system differentiates Danaher and reinforces our sustainable long term competitive advantage.

Speaker 2

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

Speaker 1

Thanks, Reiner. That concludes our formal comments. Leo, we're now ready for questions.

Operator

Hercara. We'll take our first question from Derik De Bruin of Bank of America.

Speaker 2

Horrigan. Hi, Darren. Good morning.

Speaker 3

Hi, good morning. Thanks for taking my questions.

Speaker 4

Just a couple of sort

Speaker 3

of like incomings from clients. I think first of all, just a little bit more on the difference between I think you mentioned $19,000,000 on the Cepheid guide and it came in at $17,000,000 Just a little bit more color on the volume difference there. And I think also related question, just Are you seeing any sort of stockpiling in terms of either vendors for either bioprocessing or Hercology on the Diagnostics side and I've got one more follow-up.

Speaker 2

Thanks, Derek. Well, let's start off with the Hercology. The cartridge shipments here in the Q1, early in the quarter, as many, We suffered from some absenteeism related to the omicron outbreak in our manufacturing plants. And that affected The production level on the one hand. On the other hand, the mix shift call.

Speaker 2

Larger than anticipated towards the 4 in-one test, 65% versus our assumption of 50% Ended up resulting in a beat in terms of revenue. So really a short term contained issue that affected manufacturing volumes, Ultimately, the mix and the strength of the team's recovery ended up resulting in the 17,000,000 cartridges of shipment. Now, if we switch gears briefly and go to the topic of stockpiling, we are very, very sensitive to this particular topic And stay extremely close with our customers. As an example, in the Q1, Cepheid continued to be sold out. Herb.

Speaker 2

If you think about bioprocessing, this is an area where there continue to be in the industry manufacturing constraints. So we are very, very Hercology. Our customers working together with them with their manufacturing schedules to ensure that we're able to not only meet their needs, But also to ensure that we don't have inventory build up in the system. So could there be pockets of that perhaps on the margin, but generally speaking, We don't see a significant buildup in the supply chain.

Speaker 3

Great. And just can you On the China headwinds in the quarter, that's 200 basis points, what's supply versus demand?

Speaker 2

Well, this is entirely related to supply and accessibility of customers. So the demand in China continues to be very robust. As you may have noted without the in the Q1 without this Hoagland, a large project in the prior year. China was up high single digits for us, orders very strong. So this is really related to customer accessibility Partnerships and the other manufacturing plant that's affected by these shutdowns.

Speaker 2

Now as we sit here today, We're already receiving the news from our team that we're able to open up not just our plants. And so those are starting to open Herr. Here as well, boldly but surely, as well as we would expect throughout the quarter, client or I'm sorry, Herbst. Well, as lab accessibility to improve already in May and then get back to more normal levels here

Speaker 3

Hallum. Great. And if I can sneak one more in. The 2Q hit, Nice to see you reiterating the full year guide with that. Is that expected you expect all that China business to come back?

Speaker 3

Or you think you'll see stronger growth in other regions offsetting it? Thank you. I'm done.

Speaker 2

This is mostly about China getting back to normal levels and both customers as well as our plants having the makeup capacity to make up for What we think are relatively short shutdown period. Having said that, the business is a large one and there's always pockets that will grow faster. So Between the two things, we feel confident that our guide for the full year holds.

Operator

Hargrove. We'll take our next question from Vijay Kumar of Evercore ISI.

Speaker 2

Good morning, Vijay.

Speaker 5

Good morning, Rainer, and congrats on a solid Q1 print. Maybe one on the back heating side, Rainer, I know it's part of the call today's. I guess yesterday J and J did pulled out their vaccine guidance. They're not guiding to vaccine revenues anymore. Obviously, there's been a lot of questions on the vaccine side and base bioprocessing.

Speaker 5

So maybe just talk about By pricing trends in the queue, what were order trends? Were orders above revenues? And are we still confident about the $2,000,000,000 of vaccine

Speaker 2

Herbst. Well, thanks, Vijay. So let's just level set on the numbers briefly Herbst. We think about bioprocessing, Q1 and as I mentioned during my opening commentary, we extract very large Q1 shipment last year in China. Our bioprocessing business was up Low double digit here in Q1, very, very strong quarter activity.

Speaker 2

And I'll come back to that in a minute. Now, if you look at our Q1 last year, our sales were up over 70%. And so if you look at the 2 year stack for Q1, we're in the 35% to 40% growth area, which we think is very robust more than representative of what is going on in the market and think that that compares extremely well. In fact, we still think that we're taking share there. So that's sort of one marker that I want you to have.

Speaker 2

And then the second point is the order activity continues to be very, very strong. Last year, our orders in the Q1 We're up over 90%. And so we anticipated that our orders in Q1 of this year would be down. Nonetheless, we continue to build backlog here in Q1 as well in the bioprocessing area. And this is why We're so confident in our core growth guide here for the year on bioprocessing of high single digit, low double digits between The robust growth that we're seeing and the backlog that we have, that's really important.

Speaker 2

So now let's unpack that a little bit and think about Herbst. What's going on and why, COVID is sort of one variable, but that there are other variables here that are incredibly important Herbst and explain why we talk about the bioprocessing business and its growth in aggregate. Hercology. So first of all, as you think about the activity levels outside of COVID in the bioprocessing business, it's important to See what's going on in clinical trials and I've talked about this, but you know that project pipeline for monoclonal antibodies is 50% larger Hallum. For cell and gene therapy, it's 10x larger, driving extraordinary activity here in the clinical trials area.

Speaker 2

And what you see and as I mentioned in the opening comments, you see customers really starting to focus on These new projects across all modalities and not just allocating the resources to COVID, but to these So that's really important to note that customer activity level continues to be very, very high And that plays through in the clinical trials. Now another point to take here is monoclonal antibodies are becoming the standard of care and the predominant class of biologic drugs. So, what's going on in monoclonal antibodies Herr. The primary growth driver in the market and also for our business and recently launched products that are ramping Hercology. To new treatments and new indications are driving an exceptional amount of volume here.

Speaker 2

And then you add to that that emerging markets and high growth markets such as China and India Are starting to have access to these monoclonal antibody treatments that provides additional and significant volume leverage. Call. At the same time, you have biosimilar growth, Vijay. So these biosimilars are leveraging the fact that some of the biologic drugs, monoclonal antibodies that are higher volume are starting to come off patent and that's increasing the penetration of those drugs Herb. Throughout the world where the penetration has been lower and that's providing another growth impetus.

Speaker 2

And then lastly, and I'll stop with this now. We've been talking about single use technology and their adoption for a while, which is an additional leverage growth vector within the bioprocessing business. So all that healthy activity that we who talked about provides for volume, but SUT on top of that is substituting more traditional technologies and is growing even faster. And we have Well over $1,000,000,000 of single use technologies and we've just announced our 3rd new plant coming on for single use technologies And that's why we look at it together because it's the aggregate that we look at and that really ultimately count Herr. That will drive that high single digit, low double digit growth here for 2022 And also support our high single digit perspective beyond that.

Speaker 5

That's helpful, Reiner. And maybe one quick one for the group. I think incremental margins, we were looking at perhaps mid-30s, Hercology. Q1 came in below. Matt, was this supply chain inflation impacting Q1 or perhaps FX or maybe just talk What incrementals and have expectations changed for Raffesco 2022?

Speaker 4

Yes. No, for Q1, I mean, we kind of came through about 25%. I think that was pretty much in line with what So no real difference. I think from a year over year perspective, the difference between that 35 to 40 that we normally Hercology. I talked to in this 'twenty five, it was all FX, right?

Speaker 4

So in the quarter, I mean, you think about it, it was kind of like a $0.07 headwind here for us. So I don't think we saw anything obviously, supply chain is what it is, but I think we were able to kind of work our way through that. I really think it was all FX here in the quarter and Q1. As far as and I think you bring up good point then as far as the full year goes, Herriss. So I would say there's no change to the full year fall through other than the FX impact that we're seeing.

Speaker 4

And just to kind of Hercology. Lay that out, we continue to expect mid single digit core growth from kind of the core and acquisitions, And that will have that 35% to 40% fall through. In January, we thought that FX was going to bring that 35% to 40% down to 30% to 35%. But given the currency moves we've seen since January, as we sit here today, I think it's going to be more like 20%, 25% fall through for the year versus the 30% to 35% that we sort of guided to the last time. So, look, it still leaves us Herb.

Speaker 4

If we deliver that, that still leaves us with low single digit EPS growth for the year despite what I think is some pretty significant FX headwinds year over year. And maybe just to give you a Color on the sizing of that headwind, I mean right now, FX is going to be a $0.35 EPS headwind year over year, and that's a pretty meaningful number for us Here during the years, it's probably half of what we initially thought. So it's a pretty big headwind here

Operator

Hargreaves. We'll take our next question from Scott Davis of Melius Research.

Speaker 2

Scott, good morning.

Speaker 1

Good morning, guys. Thanks for all the detail here. The price dynamic, I mean, I know it's FX is FX, Can't do much about that perhaps, but are you still out there capturing additional price to offset the general inflation and general cost and logistics

Speaker 2

Hirsch, we have been working price Directly and indirectly, and we're seeing very good traction. Let me lay that out for you here. And let me start off with the fact that Herr. There are inflationary pressures out there. We've talked about that in the past.

Speaker 2

And that's moved from sort of the classic topics of Memory chips and other types of chipsets and freight and perhaps labor to seeing more business. But nonetheless with the Danaher business system, our teams have been able to do a number of things here in order to One, of course, is related to ensuring the robustness of the supply. Many of our businesses today are gaining share Because we are able to continue our supply, have shorter lead time because we're able to access and secure The components necessary to drive our manufacturing and our business. So it's an important aspect to Herr. This entire equation of growth and share gain.

Speaker 2

Secondly, the DBS tool sets that we have been putting in place Herr. Are also helping us offset cost in the sense and as I mentioned in the introductory comments that, look, we are able to now Herr. Reengineer more quickly to other types of, again, I'll use the example of chipset to next gen chipsets More broadly, consolidate those and not only gain supply, but then also reduce our costs. So there's an entire DBS machine, if you will, that is driving to secure supply and to offset costs. At the same time, of course, we're driving price and we see strong traction there.

Speaker 2

In fact, we're well over 200 basis points of price here Hallum. In the Q1, and that's a quarter that still had a fair amount of, if you will, 2021 backlog in it, right? So we have now worked through The majority of that backlog and expect to see continued momentum there. So thinking about price At these levels of 200 plus basis points, that's the right way to think about that. And it's just another testament to the strength of our portfolio, the degree of differentiation of our product and The leverage that this razor razorblade business model provides us with 75% consumable, Many of which are specked in or keyed in to the equipment or instruments that they supply.

Operator

We'll move next to Dan Brennan of Cowen.

Speaker 2

Hi, Dan. Good morning.

Speaker 6

Good morning. Good morning, Ryan, and thanks for taking the questions here. Congrats on the quarter. So if I could just go back to Bioprocess, obviously really nice quarter with the high single digit growth against an extremely tough comp. Hercology.

Speaker 6

I appreciate COVID is part of the base and it's great about all the robust demand out of the ex COVID, which is a big driver long term. Given the interest in kind of dissecting COVID at this point from investors, it would be helpful to learn if the 2022 high single, low double digit guide who will continue to incorporate $2,000,000,000 from COVID. And if it does, any color you could provide there about like how much of that $2,000,000,000 is locked in with firm orders?

Speaker 2

Thanks, Dan. Really the way we're thinking about that business is, again, in aggregate and we do believe that both The underlying strength of the markets as I just laid out, as well as the strength of our backlog, which continues to grow, Support both the high single digit, low double digit bioprocessing guide for the year. And as you think about COVID within that, COVID is going to do what it does, but there is a larger market that is growing rapidly And we're going to continue to see fluctuation as it relates to COVID volumes, whether there's a decision on booster count for different age groups, Hulsey. Whether it becomes part of an annualized immunization regimen. All of these are open questions.

Speaker 2

And our belief is COVID is a part of our business, but there is another part of this business, which is larger, is growing at a faster rate, And we are making investments to ensure that we capture the appropriate shares here. So, Herb. Dan, high single digit, low double digit bioprocessing growth for 2022.

Speaker 6

Hercology. Perfect. Thanks, Shania. So Aldebron, really strong quarter out of the gate. Maybe can you give us a little color on how the integration is going?

Speaker 6

And in light of the really strong Q1, how do we think about Aldebaran for the full year in 2022 and beyond?

Speaker 2

Hercology. I mean, we couldn't be more pleased with the team. I've been up there several times working with the team, seeing how they're growing, bringing on capacity. We continue to invest in expansions there and that 40% growth exceeded our expectations and give you a sense of how quickly the Danaher business system has gained traction. And that's a combination of a couple of things.

Speaker 2

The first thing is, The leadership and the team at Aldevron that is pulling and open to applying the Danaher business system as fast It's possible to fortify their competitive advantage and lead times and quality and to ensure that we drive this business Hallum to the growth of its potential. And we think for 2022, we continue to think that the $500,000,000 Revenue number is a good number, 40% in Q1. We certainly expect to be Herr. In the first half here, well over our expectation of 20% plus That we previously talked about. So $500,000,000 for the year is a good number and that team is firing on all cylinders.

Speaker 6

Hercology. Just on China, obviously, good news that you guys are managing through this and the full year guide is maintained. Maybe if you could just give us an update like in Q2, What you're actually expecting for China, maybe you said the number, I missed it. And kind of how do you think about China for the full year since you are expecting a nice rebound Good morning, Q2. Thank you.

Speaker 2

Sure. So just to revisit, we've talked about China here. In the Q1, It was really the end of March where we started to see the impact of some of these larger scale shutdowns and we continue to see those here in the 1st week of April, although, we've just spoken to the team here yesterday and they've received approval Herbst. To start opening up plants and we also see more activity at our customers. And so we do expect to work through The shutdowns here in the second quarter, again, that was the 200 to 300 basis point headwind that we included in our Q2 guide of mid single digits.

Speaker 2

So as we think about The quarter here and for China, remember we had a very strong activity level in Q1 of High single digit growth minus that large transaction last year. And we expect that in China, we'll probably be down in Q2, Hercology. Mid to high single digit percentages for the quarter. Now once again, we expect that to unwind in Q2 and then continue to catch back up here Through the year, where we continue to see China as a high single digit market.

Speaker 6

Great. Thank you.

Operator

We'll take our next question from Jack Meehan of Nephron Research.

Speaker 4

Good morning, Jack. How are you?

Speaker 7

Thank you. Good. Good morning. So on life sciences, wanted to turn to with some of the capital heavy businesses, SCIEX, Leica Micro, Pall Industrial. Can you just talk about the durability of the growth you're seeing there?

Speaker 7

How are order trends? Horkul, any change to the growth expectations for the year? So

Speaker 2

in life sciences, if we Now pivot from bioprocessing and more to life science analytical businesses, as you suggest, Jack, We're seeing very strong underlying activity in the various sectors Herr. Of the business, if you think about the Pharmaceutical segment, CROs, academic research customers, Our funnels are strong and continue to outpace quarter over quarter what we've seen in 2021. I think that's buttressed for us Hallum, particularly because of the strong innovation track record and the recent launches that we've had. I've talked to those at The SCIEX, the XenoTOF, the ACURATE Math instruments as well as the 7,500 Triple Quad. Those are class leading innovations that are growing exceptionally well Hercology.

Speaker 2

And driving market share gains, Beckman Life Sciences with their CytoFlex benchtop cell sorter, the most recent launch. And then of course, we talked about Mika, Which is that combination of wide field and confocal leveraging machine learning. So we're firing on all Cylinders here in a strong investment environment. And we think that that's sustainable here for the foreseeable future As we continue to see investments from both the biotech sector, but also Academic sectors as well as institutions that are very, very bullish on the innovations and the science that they want to drive forward.

Speaker 7

Great. And then just a broader question on M and A. It's been obviously a very choppy Macro environment. If you look at the cash flow statement, it was a light quarter for you on M and A. Just curious how you're seeing assets In the market, do you feel like expectations have changed at all from sellers and just your own willingness to do M and A kind of in a choppy environment?

Speaker 7

Thanks.

Speaker 2

Well, Zach, I'll tell you, we've excelled in these kind of environments historically from an M and A perspective. These environments of dislocation inevitably show up opportunity, and We feel very good about how we're positioned with our funnel. Now having said that, the volatility that we're seeing today is, Holt. While it might not feel that way relatively recent and it's probably a little too early to see the full impact of that volatility. Herb.

Speaker 2

Having said that, we're sitting here at with 2x turns, very strong free cash flow of over $7,000,000,000 and over $10,000,000,000 of EBITDA. So we feel like we're in a very good position

Operator

We'll take our next question from Patrick Donnelly of Citi.

Speaker 4

Herb. Good morning, Patrick.

Speaker 6

Hey, good morning, Ryan. Thanks for taking the questions. Maybe one that's going to jump from Herr. Away from China on the geographic spot. Over in Europe, obviously, a lot going on there on the geopolitical side.

Speaker 6

Can you just talk about if you've seen any for the question. Any change in customer behavior, any change in funding over there? What your guys' perspective is on that region as we work through this?

Speaker 2

Hercology. So Western Europe has continued to perform very well for us. As I mentioned in our Herr. We had strong growth in the mid teens in Western Europe here in the Q1. And while we think that moderates a little bit here in Q2, just because of some of the prior year Herr.

Speaker 2

The activity levels remain very strong. Certainly in Western Europe, That's the case. And as you think about in your reference to the geopolitical side, Eastern Europe just has not been that large of a factor Hercology. In the life science research and bioprocessing area as an example. And from a diagnostics perspective, we continue to see Very high, let's say, close to normal activity levels as well.

Speaker 2

So Western Europe for us Continues to perform as expected.

Speaker 6

Okay. That's helpful. And then maybe on the diagnostics business, just looking at the core performance there Hirsch. COVID looks pretty strong. Can you just talk about that?

Speaker 6

And then maybe Matt can talk about the diagnostics margins also really strong, just the sustainability there.

Speaker 2

Hercology. As we think about the business momentum, really in all regions with the exception of China, which I talked about, we're seeing patient levels, activity levels Really at or very close to pre pandemic level. And so from Macro perspective and patient volume, it's a positive environment for us. And then if you put on the back of that the recent Product launches that we've had, the DXH900 Hematology as well as the DXA FIT Hallum and automation for small and medium sized labs. We're also continuing to benefit Hercology.

Speaker 2

From that NPI pace that we have invested in here over the past year. So for us diagnostics continues To be a strong forward momentum. Matt, did you want to take this one?

Speaker 4

Yes. I mean, on the margin front, I mean, like I think Hallum. You think about that is going to be a big part of that will be Cepheid and the volume that we're seeing there. So as long as we've got that volume and we expect to have Hercology. A touchless here into next quarter, but I think those margins are pretty sustainable at that level.

Speaker 4

We've talked about and importantly, I think The margin profile of the Cepheid respiratory is no different than the margin profile of other Cepheid tests, Right. It's actually very similar to the flu. So, I think it's a sustainable number here as we look forward.

Operator

We'll take our final question from Luke Surgoth of Barclays.

Speaker 2

Good morning, Lou.

Speaker 8

Good morning. Thanks again for the question here. So I guess I just wanted to kind of dig in on the long term growth target, the biopharma high single digits I'm really trying to figure out where the offsets are coming from. You talked about the MABS. I know you're adding new capacity, but as COVID kind of is completely up in the air and that rolls off.

Speaker 8

Give us a sense of how much that could roll off and you guys continue to maintain that long term growth target?

Speaker 2

Happy to. So, Luke, the way we're thinking about that is Herbst. The strength of our underlying business, which I've laid out here in some detail, some clinical trials, math, Keep in mind, it's the commercialized drugs that really drive volume here in this business. And then of course that additional growth accelerator, the single use technology adoption. Those are really the That are driving the growth of this business.

Speaker 2

And the COVID business, it will do what it does, But that variation is within the realm of what we have been casting as the overall growth rate of the business. And so You take the backlog, which continues to grow quarter over quarter and you take the growth drivers that I've laid out, Hercology. That is what supports the high single digit, low double digit growth for call. 2022 and the high single digit longer term growth guide that we've talked about.

Speaker 8

Great. Thanks. It's helpful. And on so back to Aldevron here, I know they're continuing to add capacity. Is that still Hallum.

Speaker 8

Is that coming in faster than you guys expect or should we still expect that to pace out through 2023 2024?

Speaker 2

That's going to continue to pace out as we add Line after line after line, but I would say that these are programs that are coming Partnerships, which is differentiated, so unique in the marketplace, but also with their adoption Business System. So we look for that $500,000,000 here in 2022.

Speaker 8

Okay, great. That's all for me. Thank you.

Operator

And this does conclude our question and answer session. I'd be happy to return the call to our host for any concluding remarks.

Speaker 1

Thanks, everyone. We'll be around the rest of the week for questions.

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