Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2019 PerkinElmer’s Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference may be recorded. I would now like to turn the conference over to your speaker today, Mr. Bryan Kipp, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Catherine. Good afternoon, and welcome to the PerkinElmer fourth quarter and full year 2019 earnings conference call. With me on the call are Prahlad Singh, President and Chief Executive Officer; and Jamey Mock, Senior Vice President and Chief Financial Officer. If you have not received a copy of our earnings press release, you may get one from the Investors section of our website at www.perkinelmer.com. Please note, this call is being webcast live and will be archived on our website until February 10, 2020. Before we begin, we need to remind everyone of the Safe Harbor statements that we have outlined in our earnings press release issued earlier this afternoon and also those in our SEC filings. Statements or comments made on this call may be forward-looking statements, which may include, but are not necessarily limited to financial projections or other statements of the Company's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties. The Company's actual results may differ significantly from those projected or suggested by any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. Any forward-looking statements made today represent our views only as of today. We disclaim any obligation to update forward-looking statements in the future, even if our estimates change. So, you should not rely on any of the today's forward-looking statements as representing our views as of any date after today. During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent we use non-GAAP financial measures during this call that are not reconciled to GAAP in that attachment, we will provide reconciliations promptly. I am now pleased to introduce the President and Chief Executive Officer of PerkinElmer, Prahlad Singh. Prahlad?

Thank you, Bryan, and good evening, everyone. I'm pleased to report that PerkinElmer had a strong finish to 2019 with reported revenue in the fourth quarter increasing 6% year-over-year and adjusted earnings per share growing 14%, beating both the top and bottom line of our previous guidance. Our revenue in the fourth quarter was $806 million representing organic growth of 5%, and our adjusted earnings per share was $1.35.

Thanks a lot and good evening, everyone. Before I start, I want to point everyone's attention to our fourth quarter earnings call presentation, which has been posted on the Investor section of our website under Financial Information. The goal of this document is to drive additional transparency and simplicity around the Company and our quarterly performance.

And our first question comes from Catherine Schulte with Baird.

Hey, guys. Thanks for the questions. I just wanted to go back to that first quarter guide. If we back out the extra week, I think the first quarter comes in closer to 3.5% to 4%, despite having a fairly easy comp with the government shutdown we saw last year. So, could you just walk us through the pluses and minuses off of what you think a normalized growth rate should look like in that first quarter?

Yes. Thanks, Catherine. I'll take this one. So, I think, if you back out the extra week, it's more like 4% to 4.5% in the first quarter, which is down versus everything -- every quarter in the year 2019 we reported 5% organic growth. So, it's a similar comp throughout the year. I think, there's two things largely that are affecting us in the first quarter. First is genomic testing. If you remember 2019, we started off very high, particularly in the sequencing part of that business. And so that had a great first half and a little bit softer second half due to the consolidation. We expect that to continue into the first quarter, so that probably half a point of organic growth by itself, what we're planning on in the first quarter here. And the second area is applied genomics. Similarly, when I mentioned on robotics and automated workstations that had a stronger first half, weaker second half, we're expecting that to continue into the first half here. And so, those two things really are the only difference between our 5% organic run rate that we saw throughout the year, including the fourth quarter and walking into the first quarter here.

Okay. And on that applied genomics business, we've seen a number of data points suggesting that DTC microarray industry will continue to have some meaningful headwinds this year. I know you have some exposure there. So, how do you think about that business returning to better growth?

Yes. Catherine, this is Prahlad. So, I think our exposure to the DTC market is not much. Most of our relationships there are pharma and on the newborn screening side. The thing that we're just going through is the consolidation piece that we -- as we pointed out earlier, by the end of Q1 that should be resolved. So, we don't -- we, at this point, don't see that as our exposure to DTC is not too much.

Our next question comes from Dan Arias with Stifel. Your line is open.

Maybe just on Vanadis since Prahlad touched on it and we were just out there. What kind of revenues are you thinking that the placements and utilization will yield for 2020? And then along those lines, can you just sort of talk to the visibility that you have when you think about the labs that will get you there? Is there a volume trajectory that you feel confident about at this point, or is it still kind of fluid in terms of what the ramp will look like?

Yes. Dan, in fact, as a matter of fact, we have a very heavy funnel and we are actually in the -- currently in the process of shipping and installing several systems. As we said earlier and I have is, our focus right now continues to be that the earlier adopters have a flawless experience. If you just look at what I pointed out earlier, 50 to 55 installations, Dan. We placed 10 systems in 2018, 18 systems in 2019 and the implied range between 22 to 27 in 2020. So, from our perspective, we think installations are an important metric to track early on in the product’s lifecycle. But, in the end, eventually as I've said, our goal is to democratize Vanadis NIPT. So, that's where we are focusing. And also with the NIPT PLA code, that gives us several advantages in the U.S., once that is issued. So, from a priority perspective, we are looking at the number of installations, getting the clinical data out and working on the PLA code.

Okay. So, it sounds like that's a TBD on the forecast for Vanadis?

Yes. I think from a revenue perspective, our guidance will be to continue to monitor the number of installations.

Okay. And then, just secondly, Jamey, if I just think about the top-line guide, and I take out the half point or so that you're getting from the extra week, that's 5% organic at the midpoint, which is in line with 2019, which is a year where you had some organizational issues, and then either one-off or maybe somewhat unlikely to repeat elements. And then, I think at the end of this year, you should also be getting a little bit of juice from Meizheng. So, I guess, how much of the outlook for 2020 on the organic side is conservatism to start the year versus maybe something that's underappreciated about either the DX ramp or the factors that are at play in DAS?

Yes, good question. So, I mean, maybe we just kind of talked through the end markets here, Dan. So, I would say where we have a little bit of incremental caution is around life sciences and immunodiagnostics. So, it’s immunodiagnostics. Obviously, EUROIMMUN leads the way there. They have been mid-teens for quite some time. But, I think we're pretty consistent in saying that we're going to model them at 12% organic growth. So, I think we expect a little bit of downtick there. Life sciences, I don't think we've seen anything, but funding levels have remained very strong. And so, we're hopeful that it continues, but I'd say there's probably more downside than there is the upside. So, I’d say, that's where we're cautionary. Conversely, if you look at food and applied genomics, food is what we talked about in terms of some kind of rebound in the core and we had at least one data point here in the fourth quarter, should provide some upside. Offsetting that, I don't anticipate cannabis being as large and incremental contributor this year. So, those kind of offset a little bit there. And then applied genomics, once we get through the first half, we'll see how it's going, but hopefully that has a little bit of easier competition this year -- comp as well in the second half here. So, overall, to answer your question, probably a little bit cautious in life sciences, immunodiagnostics, maybe a little bit upside in food and applied genomics, the others pretty steady.

Our next question comes from Derik DeBruin with Bank of America. Your line is open.

So, a couple of questions. I think, the first one, did -- I think some companies, but maybe you don't have as much exposure here, but I think some companies were flagging that they didn't expect a significant budget flush during the fourth quarter from some of the customers as in prior years. So, I'm just wondering what you saw in terms of incremental spending and just sort of what was sort of like the year-end budget activity.

Yes. It's always difficult to tell, Derik, but I don't think we saw much. In terms of life sciences, actually it was a little soft in the Americas in the fourth quarter. Applied markets hung in there in the fourth quarter. So, maybe there's a little bit off there. But I’d say, it's difficult to tell and overall nothing out of the ordinary here.

Okay. And just on the China, I appreciate the comments on the coronavirus. We've been getting some questions today, just given that you do have an infectious disease testing business that you've got. I think, people are wondering, would you -- are you testing for it, are you going to see potentially any incremental headway to sales into your diagnostics products to potentially offset some of the headwinds you were referring to?

Yes. And maybe I'll take that. So, Derik, we are in the process of developing a PCR and an antibody assay. PCR is generally a frontline assay during an outbreak, and we are making strides. But, we do have to take it through the CFDA, which is now the NMPA approval process. And they are working with us and with the several other entities to get a frontline testing assay out. Again, most of the focus right now is doing it more from a CSR perspective, just to make sure that we have an assay that we can use for testing. What's the commercial impact of that, I would say at this point is unknown.

And Jamey, if I can squeeze one more in. So, if you adjust the extra week, about 105, 110 basis points of implied op margin expansion in 2020. I guess, is that a -- I mean, how sustainable is that sort of like 100 basis points number on a go-forward basis? I mean, is there incremental -- I mean, you're sort of at your 22ish percent operating margin targets you put out there a few years ago. Is there upside to that number?

Yes. I mean, like we've been saying, we see a lot of room for continued expansion and profitability here. And I don't think 22% was ever a stopping point. We see that ultimately over time getting up into the mid-20s. How much can be done in the year 2020? We think, 100 basis points ex the extra week is pretty healthy clip coming off 170 in 2019. To your point, I mean, we guided in 2019 120 to 150 and ended up beating that at 170. So, could there be upside to the 80 basis points that we're guiding? Sure. But, I think we're more focused on long term and putting programs in place to get this to the mid-20s.

Thank you. And our next question comes from Vijay Kumar with Evercore ISI. Your line is open.

Jamey, if I could just touch on the margin question. Extra week incremental revenues, can you walk us, like what why margins would be down? I would have thought the extra revenues benefited margins?

Yes. You’re talking for the quarter, Vijay, or for the year?

Quarter and for the year; I’m just curious why incremental revenues have lower margins?

Yes. So, if you look at Vijay, the -- and we tried to lay this out in our earnings presentation, the exact numbers. So, we feel like the extra week will provide 10 to $15 million of additional revenue, which is not what we experienced, if you just take our total year and divide it by 52 weeks. But, we think that that's the right amount of extra revenue coming into the year. However, if you look at the expenses for an next week, that more than offset that amount of gross margin. So, if you take 10 to $15 million, you get 50% roughly thereabout gross margin, then you add an extra week of operating expenses and an extra week of interest expense, it's actually dilutive to the year. Like I said, we tried to lay that out, both for the quarter and for the year on that last page in the earnings presentation.

Got you. And then, maybe just a follow-up on that theme, the extra math. One on Vanadis, is there -- are you guys in a position to compete for tenders in Europe? And related to that extra week, the $10 million to $15 million is sub 50 basis points on the topline. Shouldn't it be just -- if you did week or 53, something higher than what they implied on the extra week as?

Let me start with the extra week and then Prahlad is going to jump in on Vanadis here. So, we think most of our customers, and we actually saw this back in 2015, operate on a calendar year, so, January 1st to December 31st. And if you look at where the extra days in this year fall, they fall in the fringes. So, take this quarter, for example. December 31st and 31st for 2019 actually fall in this fiscal year 2020, but we think that the revenue from that is mostly going to be spent in the 2019 and therefore was recorded in our 2019 revenue. So, once you back out a couple of those days, you get down to, let's say 3 more days. And a lot of that is CapEx, some of that is scheduled professional services. So, not just a daily run rate. And so, therefore, you get down to some recurring revenues that are we believe in the 10% to 15% range, which ends up being 1.5% to 2%, which was very -- for the third quarter of 2015, we actually said that it was 2% impact to our organic growth. So, it’s kind of a similar operating assumption here.

Vijay, for the first part of your question, yes, we can and are starting to participate in tenders in Europe.

That's helpful, Prahlad. And just to be clear, the guidance has no assumptions around any potential wins in Europe on Vanadis?

Well, I think, what we are assuming basically is 22 to 27 installations. So, some of it is in Europe, some is in Asia and some is in the U.S. We are not sort of focusing on which particular tender, Vijay, we could win or which we wouldn't win.

But, there will be some CapEx revenue in our year guidance as well as some sample ramp as well.

Thank you. Our next question comes from Steve Beuchaw with Wolfe Research. Your line is open.

Hi. Good afternoon. Thanks for the time here. I was hoping first, you could unpack your thought process around reproductive in the 2020 guidance. Birthrates particularly in China were a headwind there in 2019. So, what do you expect for broader growth in that category? And are you thinking about the birthrate dynamic prospectively?

Yes. I think, overall, we think reproductive health ticks up a little bit. So, we've got Vanadis that should kick in some, genomics testing that gets reported in there that should kick in some. I don't -- we are not anticipating any good news on birthrates. We think we've continued to see significant issues, particularly in China. We expect that to continue. We have a lot of good APAC expansion that I mentioned earlier in my prepared remarks around the Philippines and Japan and Vietnam. So, that has a little pressure. So, net-net, there is probably a little bit of upside to reproductive health year-over-year. But, we're definitely planning on birthrates impacting us, and we'll see where geographic expansion gets us.

Okay. And then, not just for 2020, but maybe even with a medium term bend. I wonder if you could speak for a minute about cannabis. You mentioned that the growth impact for cannabis in 2020 you expect to be somewhat smaller than it was in 2019. Can you put any numbers around that? And is that, market is just somewhat matured, or is there a competitive dynamic? Why would that be slower growth after a big 2019? Thanks.

Yes. I mean, cannabis this year performed extremely well. We're thrilled with the team, the solution that we bring. Pralhad mentioned that it was $26 million in revenue, which was off a $10 million base. That kind of incremental contributor is difficult to predict. And we are not banking on that in this guidance. We expect it to go up still at a double-digit rate, but to go up another $16 million just feels like a significant planning assumption that we're not. It could happen, but that's not what we're banking on right now. So, the market still seems great. We'll see how it states for a while. I think there's couple more that'll come on line in 2020. But, I don't think we're going to bank on that kind of incremental contributor this year.

Thank you. Our next question comes from Tycho Peterson with JP Morgan. Your line is open.

Hey, thanks. Sorry to go back to the 1Q guide. But, you mentioned backing out the extra week you guess would have grown 9% to 12%, $0.75 to $0.77. That's still below consensus. I would have thought with the recent reorganization efforts, you would have at least been able to guide to consensus. So, can you talk about if there are other offsets other than the extra week that are kind of weighing on EPS in the first quarter?

Yes. I mean, -- hey, Tycho. So, in general, there is probably a little bit of mix difference in the gross margin line versus what we kind of exited the last end of the year on as well as on the operating margin line. There's a little bit of comp timing year-over-year, as well as some investments we're making in our growth accelerators in terms of Vanadis and cannabis, et cetera to kind of set up the year. So, overall, we think we'd be up about 40 basis points in the quarter, excluding the extra week. And that continues the uptick throughout the year here.

Okay. And then, a couple of quick clean-ups. It sounds like the Vanadis installed base went down, it was 19 last quarter and now you're saying 18. Was there something, did the customer return or why did it go down?

Tycho, it's 28. So, till the end of the third quarter, we were 19, and that went to 28.

Maybe, Tycho, what we were saying was in 2018, we delivered 10 systems. In 2019, we added 18 systems to get to 28. Next year, we're guiding somewhere in the 22 to 27. So, we’re taking a methodical approach to increase our placements every year and be prudent on how we roll out these systems.

All right. And then, on EUROIMMUN, mid-teens in the fourth quarter, you made a comment that that's maybe not sustainable and we should be back to thinking 12% maybe 13%. What -- was there something in the fourth quarter that allowed us to overshoot to the upside?

No, no. I mean, look, we hope that it's mid-teens. I think, we've been consistent in saying that we're going to budget a year at 12% going forward. That's what we planned in initial deal model. Throughout the first two years of having EUROIMMUN in the PerkinElmer family, it's grown mid-teens both years, maybe it does again. So, we've always been consistent in saying, we'd like to plan this at about 12%, based upon terrific product introductions, geographic expansion, including the U.S. And we just think 12% is a good operating assumption.

Okay. And then, just one last quick one on the genomics, the automation. It sounds like you're going to recapture half of it in the first quarter. Was that in line with your original expectation or were you expecting to recapture most of that in the fourth quarter?

No, not as much. Actually, Tycho, we're expecting that to persist into the first quarter. So, some of the pressure we saw in the second half of 2019, we're expecting to persist. We keep seeing things push to the right here from a demand perspective, and we're not banking on that that will change in the first half year. Naturally, when you get to the second half, you get a different comp. If it's better than that, we're happy. But right now, our operating assumption is that we're going to continue on with the growth rates we saw in the second half of 2019 into the first half of 2020.

And our next question comes from Patrick Donnelly with Citi. Your line is open.

Maybe just building on Tycho's question on EUROIMMUN. Can you just talk through how sensitive that business is to the China hospital volume? And then, maybe just give us some color on what kind of the volume per day looks like on the growth there?

Yes. Patrick, I think it'll be difficult to give a volume per day. I think, as Jamey pointed out in his remarks, given the evolving situation right now, all we're doing is highlighting the coronavirus thing. You don't know what the impact of that will be. It all depends on how it plays out over the next few days or weeks. I think, the point that Jamey made to Tycho's earlier question is that EUROIMMUN has done better than what we have forecasted in the deal model, which has been 12% over the past couple of years. And we hope that it continues to do that way. From our forecasting perspective, we have modeled it at 12%.

Okay. And then, maybe Jamey, just on the cash flow, I appreciate the 75% to 80% conversion guidance. Can you just talk about some internal initiatives you guys are focused on there? I know you had some headwinds around receivables and inventory, kind of extended out some agreement terms. Can you talk about the trends you're expecting in 2020 there, the focus points?

Yes, sure. Thanks, Patrick. So, I mean, we've learned a lot about cash flow over the last year here. And we've made some progress, not where we wanted it to go to, but definitely some uptick. The 2020 operating assumption is that working capital turns are basically static, unlike the last couple of years, where we've actually been reducing our working capital turns, and it's been a headwind. So, there's internal processes around things like billing and invoice accuracy and timeliness and collection efforts, et cetera. But really, when you look at receivables, it's in three or four different business models. And we expect some of that to somewhat plateau in 2020. We've seen terms changing, particularly in China and some of the emerging markets that are much more developed now. Informatics, we've started to sell subscriptions on a three-year basis, a couple years ago. So, we should expect some more cash from that. Cannabis, we've been leaning into a little bit here. So, the fundamental -- embedded in this 75% to 80% is basically static from an efficiency standpoint, which will be great. Hopefully, there's upside. And certainly over the next couple years, we'll drive that. The second thing I'd say is around capital expenditures. So, capital expenditures downtick I think about 20% this year. We didn't repeat some of the investments in genomics, and we've been kind of monitoring EUROIMMUN. I would say over the next couple of years, there are two remaining areas that require capital expansion. That's EUROIMMUN in China; we're building out a facility there. And then, our Tulip business in India is growing extremely well. And we’ve got to increase some of the facilities space there. But after that, I don't think we see a lot of capital expansion. So, we've kind of reduced it a little bit here. It'll be static for a little while. And then, hopefully, that downticks over time.

And our next question comes from Doug Schenkel with Cowen. Your line is open.

I'm just going to ask three quick ones, and then get back into the queue because just I’m on the train. And I don't want to have too much background noise. So first, following up on Patrick’s question, has there been or is there any formal change to plan for incentive comp as it relates to free cash flow conversion? Second, what assumptions for growth by geography are embedded into revenue growth guidance for the year? And three, what are your capital deployment priorities for the year? Do you have a target in terms of capital you intend to deploy? And what’s the mix you expect between share repurchases and M&A? Thank you.

Yes, sure. So, I didn't catch the second one, but I'll answer the other two and then ask you to repeat that one, Doug. So, incentive comp is now in all of our financial plans. Free cash -- or sorry, free cash flow is now in our incentive comp plans. So, that answers that question. From a capital deployment perspective, we continue to remain acquisition first from a priority standpoint. And so, I think, if you look at the last couple of years, we did four acquisitions in ‘18, four acquisitions in ‘19. We always look at a healthy pipeline. I think, you can expect us to be active there. The dollar amount might fluctuate, but I think that's still our priority here from a capital deployment. We ended leverage a little bit down versus the end of last year and our liquidity is much stronger after refinancing. And then, in terms where, it's always been pretty consistent. I think, we're primarily focused on diagnostics and life sciences. And I think that's it. And you cut out on the second question there, Doug. What was the second question?

Yes. Sorry about that, Jamey. What are your assumptions for growth by geography, in terms of what you embedded into revenue growth guidance for the year?

Yes. Good question. So, basically, we're pretty much mid-single-digit across the board. If you look at Americas and APAC, that's been mid-single-digits all 2019. Europe was low-single-digits. We expect the Vanadis kind of revenue to clip that over into maybe the mid-single-digits reign, I call it a weaker mid-single-digits. So, pretty consistent across the board and pretty consistent with what we saw in 2019.

Our next question comes from Jack Meehan with Barclays. Your line is open.

I wanted to start, maybe move back to DAS. I was curious what you're seeing from your industrial customers, what that grew in the fourth quarter. And just given the current state of the macro, what the 2020 guidance assumes there in terms of progression?

So, I think, talk about 4Q to start with, Jamey.

Yes. 4Q was flat, consistent with where it's been most of the year, Jack.

And then, for 2020?

We expect no change. Industrial environmental has been remarkably consistent for us, pretty flat throughout the entire year. And I think that's our operating assumption going into 2020.

And then, back on the diagnostics business, I wanted to follow up on the genetic testing lab, just marking the market. What was the final contribution for 2019? What does the guidance assume for 2020 contribution? And given the pace of the transition, is there any additional timing dynamic there, assuming for the first quarter as well?

Yes. So, 2019 genomics testing did extremely well. Obviously, it was much stronger in the first half than the second half; it was probably a little under $20 million in total. In terms of 2020, I think we'd rather not give the specific guidance here, but you can expect that it's going to grow substantially. And, in terms of the cadence through the year, I mentioned in my earlier remarks that the first quarter will continue to be challenged, because the consolidation is not supposed to happen till the -- well, it’s happening right now, and the real road block there is hiring. We feel good about it, but sometimes it can take two or three months to onboard people in that space. And so, we feel like the second quarter is when we'll start to ramp back up again. And so overall, we expect another healthy incremental growth driver from genomics testing in 2020.

Great. If I could squeeze in one more, what were the individual contributions from Meizheng and Cisbio? The acquired growth in DAS was a little bit higher than what we looking for. Was there anything outsized that contributed in the quarter?

No, not really, no. Cisbio and Meizheng both continued to do well. I think, we said Meizheng has been growing into the 20% plus range and it continues to perform well. We got I think 11 out of 13 weeks or something in the quarter from them. And Cisbio has been double digit all year.

Thank you. Our next question comes from Brandon Couillard with Jefferies. Your line is open.

Hey, Prahlad. I was curious if you could just touch on the services business for a minute. I know you did some restructuring there in the third quarter. Just curious what your outlook is for the OneSource business, specifically enterprise services as look into 20?

Yes, Brendan. I think, in terms of the services business, we did some restructuring, as you’ve seen. This was again with the implementation of ServiceMax. We continued to sort of see productivity coming out of there. I think, as we look forward, we are in a good position for 2020, and we expect to win some tenders. And I think, as you said, it will continue to be a high single digit growth business for us.

I see. And one just for Jamey on the tax rate ticking up a little bit this year. Is there anything specific behind that or just added level of conservatism sort of embedded for the tax rate?

No. Yes. It’s good question, Brandon. It had gotten down to about 14% in 2018. We guided 16% for the year, and came in at 15%. So, there is a little natural uptick in tax. I think, if you look at where we are growing, you look at EUROIMMUN, you at Informatics, Enterprise, a lot of those areas are higher tax jurisdictions. So, therefore, we do anticipate that to go up a little. And then, the offset to that which is difficult to forecast are some of the discrete items. We always have tax planning items, we had a lot in 2019, which basically brought us from the 16% down to 15%. But there is a little natural upward pressure there that makes us think that 16% is the right number.

Thank you. Our next question comes from Dan Leonard with Wells Fargo. Your line is open.

Thank you. A couple of things. One, Prahlad, you teased us with some potential proof points coming in 2020 as a result of the combined efforts of the organization? Are these - whether they be new product introductions or service efforts or what have, are these things that would have an impact in 2020 or are these things that would build and have a further impact in 2021 and beyond?

I think, we started seeing some of the benefits already, as I pointed out the whole cannabis workflow solutions that we have seen. There have been other examples of where we’ve combined our sample prep business from the applied genomics sides with reagents from our life sciences business. So, we've started to seeing proof points of this. And I don't think it's going to be a discreet 2020 item. It will continue to be ongoing. And we expect to see more synergistic opportunities coming out of this.

Okay. And then, secondly, can you walk me through your strategies to go from -- you mentioned the PLA code. Can you walk through your strategy to go from that PLA code to getting that code included in medical coverage policies for NIPT?

I think, just getting the code offers us the advantage that as a manufacturer we can negotiate reimbursement rates directly with peers and direct billing on a methodology that would be specific to Vanadis NIPT. And that hopefully offers better reimbursement rate for the laboratories. And also additionally, we can bill insurance without any risk of incorrect coding. So, I think, that's the level I want to share just given the competitive situations and for commercial reasons. But at this point really what I would say is that we're really excited about EMA's acceptance of our PLA code that came in at the end of December. And right now, we are all hands on to ensure that the submissions get in time and we get the code in hand.

Okay. Thank you. And then just final clean-up for Jamey. Jamey, what was the China growth rate in Q4? Was it consistent with the mid-single-digits of APAC or was it higher or lower than that?

Consistent with APAC, Dan.

Thank you.

No problem.

Thank you. And we have a question from Paul Knight with Janney Montgomery. Your line is open.

Thanks for the time. I know the product portfolio has clearly benefited from cannabis and food safety testing. Is there any goal you would have or point on the R&D that you want to spend this year? Is it increasing faster than revenue, and what are the some of the areas you would like to develop further?

Yes, Paul. Overall, R&D if you look at it in 2019, we actually saw a little bit of efficiency, and that was related to some of the organizational restructuring. We want that to be ticking up a little bit over time. And so, what's embedded in this guidance is kind of a constant R&D as a percent of sales, if anything, maybe a little bit of uptick. You mentioned cannabis and food, that's one of the areas that we're increasing some of our budgets. And I think in general, we're putting a little bit more resources between, behind life sciences, diagnostics and food. And I think you can expect that R&D as a percent of revenue will be at least flat, if not up a little bit this year.

Thank you. Our next question comes from Dan Brennan with UBS. Your line is open.

Great. Thanks for the questions. So, Jamey or Prahlad, just wondering for DAS, I don't know if you guys broke out exactly what's baked in for 2020 guidance overall. And then, maybe within that I know you touched on client environment. But can you break down a little bit food and biopharma, both were solid in this quarter. Kind of what’s baked in going forward and what's -- kind of where is the outlook?

Yes. I think we're optimistic that that upticks here. And maybe it's a point or point a half. If you look at food, I mentioned it earlier. I mean, we expect some kind of rebound in core food. Fourth quarter was a good data point. If nothing else, there's some good comp here. Obviously, it's difficult to predict weather and climate change. And if that impacts us, then that'll be different than what we're planning on. But core food should rebound. I mentioned that cannabis will have a slight offset to that though that we're not expecting as much incremental contributors. But net-net, I think food ticks up a little bit. Life sciences, I think ticked up a little bit. We talked about, Prahlad talked about some of our enterprise business going well and some extra tenders and an extra week here. I think, Cisbio and Informatics continues to be extremely strong, both were double digits this year. We're planning them more in the high single digit range. So, haven't seen anything. But that’s just something we're going to plan them at double digit. So, net-net, that probably upticks a little bit. And then, industrial and environmental, we are planning flat. So, no change from 2019. So, if we make a little bit of improvement in life sciences and food, we probably uptick a little bit in DAS year-over-year.

Great. Thank you. And then, if you kind of pull the scope back a little bit. I know like a year or so ago, the conversation was maybe kind of high single digit growth type of portfolio, which obviously you guys still sound very constructive on the momentum that you have with all the business changes. But, when you think about the 2020 guide, you’ve given a lot of color on the different businesses. But, how would you characterize the 5% balance, or is there a conservatism in? And you had a call out of swing factor on the upside or downside, what would that be? Thank you.

Yes. Dan, I think, look, again, we continue to be very excited about the portfolio and the prospects that we have for accelerating profitable growth. We've got a lot of fans in the fire. I think, entering the year, we are trying to be balanced, given there are some uncertainties that we see. And again, example that Jamey talked about just coming in as with the coronavirus. You don't know how that plays out. But, essentially, the growth accelerators that we have are inherently the swing factors that will play a very important role as we look forward.

Thank you. We have a question from Bill Quirk with Piper Sandler. Your line is open.

Great, thanks. Good evening, everybody. So a couple of questions for me. First off, Pralhad, really do appreciate all the Vanadis commentary. Is there any -- just I guess last question maybe on that, any particular geography or customer type, where you're seeing outsized interest and success in terms of placements? And then, secondly, just staying at diagnostics for a moment. With respect to the coronavirus assay development, the CDC has some emergency procedures in place to be able to rapidly disseminate test from a regulatory standpoint. Are you familiar or are you aware of a similar type of program in any of the other affected countries? Thanks.

Yes. Just starting with your first question around Vanadis. I think, from an interest perspective, we are seeing interest in all the three regions. In APAC, ex-China, given that we don't have approval in China yet, we are going through the clinical in Europe, and, of course, with the recent launch that we did in the U.S., we continue to see a broad spread interest on it. In regards to your second question, yes, similar to the CDC, the NMPA and CFDA in China also has accelerated emergency processes that they have in place and we're working with them to get a test out, hopefully in a few weeks.

Thank you. And we have a question from Derik DeBruin with Bank of America.

Hey. Great. Thanks for taking a follow-up. Just one question. I just wanted to clarify, since I got a bunch of questions from investors. So, typically, the rule of thumb, when you look at extra days, is about a 0.5% organic revenue growth is a contribution for consumable revenue companies. So, the $10 million to $15 million seems a little bit white in terms of revenue contribution on the extra week. Did I hear you correctly in saying you thought some of that was pulled forward into the fourth quarter? I'm just trying to say to make sure that is, because it just seems like it's a lower number than I would have thought in your business mix?

Yes. Overall, it's 1.5% to 2%. So, the rule of thumb of 0.5% times 5, we’re only really, I guess a half 0.5% to a 1% off here. So, I don't think it's too different than what we saw in 3Q '15 nor the rule of thumb overall. I did say that -- yes, I mean, if you look at December 30th and 31st, I think most customers operate on a calendar budget and that our sales force probably much like every other year, looks at the CapEx spending and says let's execute those before December 29th. And I don't think that's any different than what we've done in most years. So, I think it's pretty much noise around the fringes here.

Thank you. There are no other questions at the queue. I'd like to turn the call back to Prahlad Singh for any closing remarks.

Thank you all for your questions. As we’ve shared today, we have a number of exciting opportunities on the horizon, as we continue to drive towards our mission and accelerate outcomes for the betterment of people and the environment. I look forward to updating you on our continued progress in 2020. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.