Good afternoon, and welcome to the Agilent Technologies First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. And now I'd like to introduce you to the host for today's conference, Ankur Dhingra, Vice President of Investor Relations. Sir, please go ahead.

Thank you, Jason, and welcome, everyone, to Agilent's first quarter conference call for fiscal year 2021. With me are Mike McMullen, Agilent's President and CEO; and Bob McMahon, Agilent's Senior Vice President and CFO. Joining in the Q&A after Bob's comments will be Jacob Thaysen, President of Agilent's Life Science and Applied Markets Group; Sam Raha, President of Agilent's Diagnostics and Genomics Group; and Padraig McDonnell, President of Agilent CrossLab Group. This presentation is being webcast live. The news release, investor presentation and information to supplement today's discussion, along with the recording of this webcast, are made available on our website at investor.agilent.com. Today's comments by Mike and Bob will refer to non-GAAP financial measures. You will find the most directly comparable GAAP financial metrics and reconciliations on our website. Unless otherwise noted, all references to increases or decreases in financial metrics are year-over-year, and references to revenue growth are on a core basis. Core revenue growth excludes the impact of currency and the acquisitions and divestitures completed within the past 12 months. Guidance is based on exchange rates as of January 31. We will also make forward-looking statements about the financial performance of the company. These statements are subject to risks and uncertainties and are valid as of today. The company assumes no obligation to update them. Please look at the company's recent SEC filings for a more complete picture of our risks and other factors. And now, I would like to turn the call over to Mike. Mike?

Thanks, Ankur, and thank you to everyone for joining us today on our call. I'm very pleased to be on the call with you today. We are off to an excellent start to our fiscal year. The Agilent team delivered outstanding results in the first quarter. The momentum in our business continues. Revenues for the quarter are $1.55 billion. This is up 14% on a reported basis and 11% core, exceeding our mid-January revised expectations. Also, as expected, COVID-19 tailwinds added roughly 2.5 points to our overall growth. Operating margins are healthy, 25.5%. EPS of $1.06 is up 31% year-over-year. Overall, a very impressive start to 2021. Our growth is broad-based. All 3 of our business groups delivered double-digit growth. All regions grew, with the 2 largest leading the way. China grew 25%, and the Americas posted 13% growth. We continue to see strength in most of our end markets, led by pharma growing 20%. These results are a testament to our build and buy growth strategy and the Agilent team's relentless customer focus. Demand remains strong for the full breadth of our offerings. We have been gaining market share in key areas. We are clearly keeping our foot on the gas. Now, let's take a look at our performance by business group. The Life Sciences and Applied Markets Group generated $722 million in revenue, up 13% on a reported basis and up 11% core. LSAG's growth is broad-based across end markets and geographies. We are particularly pleased with our cell analysis business. Cell analysis grew in the high teens, led by BioTek, which grew 26%. Growth is also strong at liquid chromatography and mass spec product lines, with both growing in the teens. Overall, our LSAG business saw very strong demand as many customers utilized their end-of-year CapEx budgets…

Thanks, Mike, and good afternoon, everyone. In my remarks today, I'll provide some additional details on Q1 revenue and take you through the first quarter income statement and some other key financial metrics. I'll then finish up with our outlook for 2021 and the second quarter. Unless otherwise noted, my remarks will focus on non-GAAP results. We are very pleased with our first quarter results as we saw strong broad-based growth exceeding our revised expectations. Revenue for the first quarter was $1.55 billion, reflecting reported growth of 14.1%. Core revenue growth was 11.3%, while currency contributed 2.8 points of growth. Now before I get into the end markets, Mike's earlier comments bear repeating. All 3 business groups delivered double-digit growth -- core growth in the quarter. Our superior value proposition continues to resonate with our customers and our team executed well, capitalizing on recovering demand in our end markets. Pharma, our largest market, was strong across all regions, delivering 20% growth. Growth was led by NASD, which experienced significant growth in the quarter, albeit against the easiest comp of the year. NASD contributed 4 points to the overall pharma growth rate. We continue to be very pleased about the ramp of the Frederick oligo facility, and the recently announced capacity expansion in Frederick is on track. Small molecule grew mid-teens, while biopharma, excluding NASD, delivered 20% growth driven in part by strong demand for LC and mass spec instrumentation. We saw strong year-end demand from pharma customers. We're also seeing increased business related to the characterization of oligo-based therapies and vaccines. The food market also experienced strong double-digit growth during the quarter, posting a 22% increase in revenue. Our business grew in all geographies driven by increased demand for food safety and quality testing. China is leading the way, driven…

Thanks, Bob. Jason, if you can provide the instructions for Q&A, please.

[Operator Instructions]. Your first question comes from the line of Tycho Peterson from JPMorgan.

Congratulation here on the preannouncement. On that note, Mike, actually, I'm wondering if you could talk a little bit about what drove the delta to the preannouncement. And then importantly, on sustainability, it sounds like you're not really calling out any kind of pull forward here. Curious as we think about it, and particularly that biopharma strength and the mid-teens growth you’ve had in LC/MS, how are you thinking about the sustainability there?

Well, first of all, Tycho, thanks for the recognition. Really proud of the performance to even top our earlier revised expectations for the quarter. And I'd say that as we got into January, business in January was stronger than we had anticipated. And I think it was -- from a geographic perspective, we saw the strength in China. Obviously, that was higher than we had. We're thinking as long as very -- really good strength in the Americas, led by pharma and the food market. I'm sure we'll dial in today on the call about the food market, which is both growth in China as well as in Americas. And then no pull forwards. So it was a clean quarter with January being stronger than we had anticipated, when we already had announced an increase in our revenue outlook for the quarter. Bob, I don't know if I missed anything on the...

No. You got it.

And on the LC/MS strength, up mid-teens, certainly better numbers than we're seeing from a lot of your peers. Can you just talk to that?

Yes, I think that it's a continuation of story that's been underway for several quarters. We've continued to innovate and provide value to the customers really see in our offerings, coupled with our approach to our field engagement and really maintaining our field force when our customer needs us most. We're getting the business. And it's very clear that not only is it a -- was there -- we saw, particularly in some of the pharma and non-COVID areas where they were basically making sure that they spent the capital had allocated for 2020, we got all that business, but it's more than that. It was a market share gain story as well for us. So I think it was a combination of a backtrack of investment by the pharma world but also our ability to gain share. And Bob, I know you've taken a close look at this and...

Yes, I think, Tycho, to Mike's point, I think one of the things we feel really good about is just our portfolio and our offerings to our customers. I think one things that we've seen is our responsiveness continues to improve, and that's been evidenced by the increased customer satisfaction that we've seen. And as Mike said, as the year-end CapEx spending happened, we were there, and I think we took more than our fair share. And we do think that this is an area that we continue to invest behind. Mike talked about the investment in the MassHunter software, which I think is going to really help continue this momentum that we have going forward from a compliance standpoint, and it's an area of focus, and we're very excited about the biopharma business going forward.

Yes. And there's a real holistic story here as well. You know the story already Tycho with our ACG business complementing, on the services and consumables complementing what we can do on leading innovative instrument solutions.

And before I hop off, just one on ACG, you grew mid-20s in China off a low-teens comp. So it's not like the bar was low. Are you doing anything there structurally to kind of drive that acceleration?

What -- I'm going to let Padraig talk a little bit about that. Padraig, why don't you share your thoughts on that?

Yes. Thanks, Mike. I think it's a combination of our scale on our service business in China and our connection with customers. And also, we've been investing in a number of years in our digital capabilities in China, which is really seeing a lot of pull-through from the customers and all markets are really driving the business forward, and we see it sustaining over the next period.

Yes, Tycho, just to build on what Padraig is saying, I mean, this is an area where we've also increased our investments in people on the street. And as we think about, Mike mentioned this in his script, actually our focus on actually turning ongoing revenue into service contracts, this is an area where we've had a specific focus in China there, and it's really helped us. And so we're -- that productivity aspect continues to play out in China.

Your next question comes from the line of Brandon Couillard from Jefferies.

Maybe, Mike, could you elaborate on your comment as far as beginning to see some improved activity in the C&E market? And maybe, Bob, could you give us some color on instruments versus aftermarket growth in the first quarter?

Yes, we're really talking about order activity, right? So we're seeing a lot of discussion with our field teams, particularly in the area what I would call high-value chemicals, specialty chemicals. So there's a lot more discussion going on with our field teams right now. And I think our customers are feeling more confident about the economic outlook and the end market demand that they can anticipate in the coming quarters. And as you know, this is against a backdrop of a lot of pent-up demand where investments have been deferred. And we're seeing -- continue to see strong PMIs. But as you heard me share the story forward, Brandon, I'm always reluctant to call a turn until we actually see a couple of quarters. So while we're optimistic about what we're seeing so far, we're not ready to yet to put it into the formal guide for the year.

Yes. And just on the second part of your question, Brandon, our instrumentation was roughly flat, and ACG was up mid-single-digits.

Then one follow-up for you, Bob. Gross margins in the first quarter were better. Do we expect that -- are you still thinking that the full year is still relatively flat to down? And any chance you could quantify the impact of the NASD capacity built on gross margin in the first quarter?

Yes. It was a little lower than what -- we would expect that to be higher in the back half of the year as we continue to ramp up. So it didn't really have a material impact on the first quarter. If you recall, we talked about that being roughly about 20 basis points for the full year, and that really didn't have an impact in the first quarter. And in terms of the overall year, I would say we're slightly more optimistic, kind of given where, certainly, the first quarter came in. And that's part of the increasing our top end, I would say, the margin expansion. It's a combination of a little more in gross margin, but most of it actually will be in the operating expenses.

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

I guess for my first one, Mike, the guidance here, I guess Q2, your comps are pretty easy. You just did 11 in Q1. Could you perhaps comment on the Q2 and why that should step down? And when you look at the annual from an end market perspective, if C&E didn't change, I guess, is this biopharma that's changing for the annual outlook?

Yes, let me take a shot at it, and then I'll turn it over to Mike, Vijay. Thanks for the acknowledgment. Yes, I'll take the second question first and then go back to the first -- second quarter. If we think about where the full year is, it's mainly in that pharma and food markets across all of the regions that we see the uptake. And we are optimistic about chemical and energy, but we're not yet putting it into the forecast. It's still at the end of the quarter. As Mike said, we're seeing a lot of business activity. We're seeing the order funnel build and so forth, but we want to actually see those translate into orders and then ultimately into revenue. So everything there is moving in the right direction, and we would expect that to continue to play out throughout the course of the year. If I look at Q2, we did have a higher-than-expected budget -- year-end budget dynamic that helped, obviously, the 11%. That doesn't repeat itself in Q2. And -- but if you looked at -- we feel very confident about the continued momentum of the business going forward.

And that was probably a couple of points of growth maybe.

Yes. It's hard to estimate, but that's the best guess that we have, yes.

Understood. And then I guess, just for my follow-up. Is the guide assuming, this COVID tailwinds that you mentioned 200 basis points in Q1, is that going to sustain? And I'm curious, what is driving the margin strength here, I guess, relative to your prior guide?

Yes. So I'll take the first one. Yes. So we're still in that 2 percentage kind of revenue range for COVID. So that's a good number to lock into.

Yes. And I think the growth on the margin expansion has been just really the strength in our volume. And I think that, that -- when we have that strong growth, you actually see it going to the bottom-line. When you look at last year, our spending profile changed pretty dramatically quarter-on-quarter as we were reflecting the pandemic and so forth. If we think about Q1 to Q2 this year, our spending, think about it as roughly flat sequentially.

Yes. And Vijay, I'm sure you had a chance to look at Jacob's margins for the first quarter, but LSAG had very strong margins. And that's -- when you have double-digit growth in LC, the strength in the cell analysis business, we had indicated when we acquired BioTek that we are buying not only high growth but also a high-margin company, I think you're seeing it in the numbers.

Your next question comes from the line of Puneet Souda from SVBL.

So my first question is on China, which you alluded to a little bit before. Obviously, a strong quarter, but just walk us through where do we stand today in China food and where the products are resonating? What's your outlook here? Obviously, this has been a market that has been improving for you after some disruptions a while ago. And just want to get a sense of where it stands and how should we think about it going forward?

Yes, Puneet, thanks for your kind comments. And I'll make some initial introduction comments here about China food, and I'll invite Jacob into this conversation as his solutions are a big part of the story here. So this is a quick remind to the audience. You may recall that we saw a slowdown for the better part of over 2 years in the China food market as a result of the reorganization of the China food ministries, and we always have been pointing to the fact that there had been really deferred investment at the national level. And now that situation has completely changed, which are -- there's reinvestment going into new technologies at the national level. In addition too, the testing volumes continue to grow for the contract testing lab side, picking up that volume. And Jacob, I think we've got a pretty good position here in the marketplace with our mass spec portfolio.

Yes, certainly, Mike. So you're right that we are seeing a broad-based interest from our portfolio. But particularly, what stands out is our triple quad, both the LC/MS and the GC/MS, which is sought after, especially for pesticide testing where both technologies are used. And what we have developed here is one workflow, one sample press that can be used for both technologies. So that is very much better performance versus many others where you have to have 2 different kinds of setups. So we see a lot of interest in that. And so the triple quad is really paving the way right now.

And Jacob invested in a China solution center as well. So we actually, again, based on these leading technology platforms, are able to tailor our solutions for that China food market. So we're really excited about the change in the business volume there, as you can imagine.

That's great. And if I could also ask in terms of pharma in China, could you maybe just elaborate your positioning there? You had really strong growth here in terms of both small molecules and biomolecules as well. Maybe just if you could characterize that, is that biomarker growth largely coming from NASD? Is that what's driving that part of the component? And the small molecules, you had really strong growth, too, so maybe if you could parse that out.

Yes. Specific to China, there's no NASD volume at all. It's zero in China. So that's purely on the -- on what we call the LSS side, which is ACG and LSAG business.

Yes. And I was going to say, Puneet, as we said in the call, our -- if you stripped out NASD, biopharma in total, so this would be our ACG and LSAG businesses together along with some contribution at DGG, grew 20%. And that was really broad-based across all regions. Actually, it was faster than that in China. But if you look across, they were all kind of neck and neck in terms of the performance across the regions.

Hey, Bob, I'd just add one thing. Although we don't have direct NASD business in China, as Bob highlighted in his script, we're seeing a lot of demand for LC/MS-based solution for oligo-based R&D research. And the fact that we're in this business ourselves with our own API business and that we have a state-of-the-art facility in our Frederick, Colorado site really helps us be able to sell solutions to our customers doing research in this area as well. So I do think there's a linkage of the oligo business into China, albeit on what we're seen on the research side.

Yes. And that small molecule in China was very strong.

Oh, yes, sorry about that. I missed that one. Yes. How can I miss that one?

Your next question comes from the line of Dan Leonard from Wells Fargo.

So first question, still trying to think of how to interpret your chemical and energy comments. The comps get pretty easy for that end market. And it doesn't sound like the 2% you reported in the quarter reflects what you're currently seeing on the order side. Are you still expecting kind of flattish chemical and energy performance through the balance of the year? Or could you help me with that?

I think the headline here is potential upside to our guide. And then, Bob, maybe you can answer the...

Yes. Mike mentioned the headline quite well. As we think about the chemical and energy, we've built in some slight improvement in Q1 and Q2, but have not made any changes to the back half.

And by the way, Dan, I'm not trying to be coy here or cute. We've just seen this market can easily can turn on the dime. And I've had experience where I've called it too soon. So once we feel confident about the book of business we have inside Agilent, we will be sure to give you an updated view of the outlook for the year.

Mike, I think it's worth mentioning again that our competitive positioning is very strong here. And as you know, we have invested very heavily into our portfolio, both from an instrumentation, but also from an informatics point of view. So when the market comes back, we will certainly see a lion's share of that.

Yes. It should have been part 2 of my headline. When the business is there, we're going to get it.

Okay. And I appreciate that. And Mike, you've seen a lot of budget cycles. Could you maybe -- what we just saw in the quarter in context, you had a strong quarter, and I know share gain is part of that. All your peers had a really strong quarter. Are we going to look back at this period a couple of years from flush, particularly in pharma? Was this 1 for the history books? Or was this just a good flush? Like how would you characterize that?

I sure hope that's for the history books because it had a backdrop of a pandemic, and what we saw was some deferred capital investment that had been -- normally would have maybe been invested in the -- our Q2, Q3 because of COVID-19 concerns. And just the fact that customers weren't working, deferred the capital. But again, I would have to say there's more to the story in our Q1 than just that budget flush. So -- and -- but...

Yes, I was going to say, I would say it certainly was bigger than the last several years. I don't know -- and -- but I think as we think about the momentum that we've seen, when you look at where we were in Q4 as well, we started seeing the turnaround. And we saw it continue through Q1, and we're expecting that to continue into the rest of this year as well. So it's not just a one-quarter phenomenon. Certainly, it was stronger than we anticipated. But we have higher expectations going forward for growth in pharma.

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

So my first question is on share gains. In your prepared remarks, and actually, I think in -- even in the press release, you highlighted market share several times in the context of the strong revenue growth you delivered in the fiscal first quarter. I'm curious if you could opine on where you think you're taking the most share and how sustainable this is? So that's the first topic. The second is on M&A. And the balance sheet is clean. You're re-upping on the share buybacks. I'm just wondering how you're thinking about M&A, and more specifically, the parameters that you are using to evaluate potential acquisitions moving forward?

Yes, Doug, thanks a lot for that. Happy to opine both questions. So yes, we really wanted to make sure the story came through that we had this a great start to 2021, and it wasn't just about a year-end budget flush. There's some really good things that have been going in for several quarters, and this continued in the first quarter. And we very specifically chose the language in key areas. So we're gaining share in some of our biggest product line areas. I would point to liquid chromatography. I’d point to mass spectrometry, both gas phase, liquid phase and the inorganic side. I'd point to our services business. And -- what else might you add to that? I mean, I think it's pretty much broad-based.

Yes, and in our oligos business.

Yes, oligos because it always comes in 3, the oligos, I mean we had outstanding growth in Q1. So we're getting market share gains in the product lines where they really are collectively needle movers for the entire company. And then relative to the M&A, yes, we were in the market repurchasing shares this quarter, this past quarter, I should say, being anti-dilutive. But our priority remains, as we communicated, our December Investor and Analyst Day, which is we want to invest in the business, not only in terms of capital expansion building down NASD, for example, but also growth accretive M&A. And that remains our priority. You may have picked up in my comments, prepared comments that the discussions with potential targets, the deal activity is picking up. And I think -- and we've seen a number of other deals announced in our space. But I'd say the volume of discussion has much increased over the last quarter or 2. So nothing to announce, but that remains our area of focus for utilization of our strong balance sheet. And Bob, anything else you want to add?

Yes, the only thing I would say is, Doug, as we think about the markets that we compete in, our framework really hasn't changed. We're looking at markets that are faster-growing than the markets that we are in or sub-segments of those markets. We think the last couple of acquisitions have really borne that out with ACEA as well as BioTek in the cell analysis space, and it's really helped continue that shift to higher-growth markets, and that's the area that I would think -- and there's really opportunities across all of our -- both in instrumentation as well as in kind of consumables area or that recurring revenue stream as well. So that's the way I would think about it.

Yes. And Doug, we continue to look for companies also not only to meet that criteria, but also we think there are strong cultural fit that really would be part -- could really be a key part of the overall Agilent family, so to speak, and also a business where we think we can make that business even better.

Your next question comes from the line of Matt Sykes from Goldman Sachs.

Nice solid quarter, guys. I just wanted to focus on, if you -- when you look at the DGG operating margin in the fourth quarter, it was obviously very strong. Just in terms of sustainability for that, what was driving that? And what should we expect as we go forward in '21?

Hey, Bob, do you and Sam want to tag team on this?

Yes, I'll start and then turn it over to Sam. I mean you see the strength really was volume-driven here -- and when we look at it. And as we ramp up that NASD facility, that's generated a very nice incremental growth on the bottom-line. As we mentioned in an earlier call, we haven't had the start-up costs really start showing up yet there. But I think that -- and then some of the qPCR activities and related have really helped drive this. Sam?

Yes, Bob, great lead-in. I'll just add as you said, NASD, that business, we are in a place where we are getting -- using more and more our capacity. And that's a good thing as it relates to margin. On the genomics and pathology side as well, we have high-value products, such as our SureSelect NGS target enrichment platform, which had a good quarter, and we anticipate that continuing to grow. That's high margin. We have leadership in NGS quality control. And it's not just instruments there, there's ongoing consumables that go along with standards. So we expect our leadership position for that to grow. And we haven't talked about in a little while. But this past quarter, we also announced our seventh indication for PD-L1 to go along with KEYTRUDA for triple-negative breast cancer, and that's another place where we have leadership and drives good margin for us.

Great. And just one quick follow-up. Just more of a high level. As you continue to grow your ACG franchise, could you just talk about how that impacts some of the divisions? And as you expand your reach, does that really help drive the LSG division and other types of segments that you have, just given that it just continues your reach within the market and deeper customer penetration?

Yes, Matt, you're on the right theme here. So in fact, when I talked about this most recently inside Agilent, I talked about this is where our LSAG and ACG businesses come together. And there really is a very symbiotic relationship here, which is both businesses help one another, right? So I pointed earlier to some of the strength we saw in the pharmaceutical industry in LC, LC/MS in Q1, but also was tied to the enterprise services story we've been talking about for a number of years. And when you start to get yourself into a different relationship with customers, they truly see you as that valued partner. And for example, when they've had several years of an enterprise service arrangement with you, and you show them collectively -- or I should say, actually, objectively, what's been going on the lab with various different vendors in terms of equipment, it will point to, for our case, a decision to let's move more of our business to Agilent instrument side. Also, I think as Bob mentioned, we were there on a responsiveness standpoint. On our services, digital capabilities, we were able to respond to customers even in the midst of the pandemic, and they remember that, that we were there for them. And that translates into instrument business when they're doing their next round of capital purchase. So I think there really is a very close symbiotic relationship. And although we run them as we show the outside world, 2 separate business group results, they work very, very closely together, not only inside the company, but most importantly, with customers.

Your next question comes from the line of Mike Ryskin from Bank of America.

This is Mike on for Derik. I want to follow-up on one thing you touched on it earlier. I mean, we've already hit on LC and just broader pharma markets a little bit. You had a comment of higher growth and pharma expected going forward. I just wanted to go a little deeper and try to get a sense for what are the key drivers here because there's so many moving pieces. You've got the end of your flush and maybe some catch-up in COVID early in the year. NASD obviously doing very well. Selling out is becoming a bigger part of the picture. You've got the share gains. So I'm just wondering, as you strip some of those out, are we seeing broader, higher levels of spend in pharma? Are we at to start of another LC replacement cycle? If you pay off some of those individual drivers, are we just seeing a better environment in pharma going forward for the next couple of years that would give you confidence that that's a little more sustainable? I got a follow-up to that.

Yes. So maybe just kind of parse out a couple of thoughts here, and then Bob we welcome your commentary here as well. So some of the things that you mentioned are clearly areas of higher growth today and expected to be higher growth for years to come. And that was part of our story back at the December Analyst Day, where we talked about, hey, we think RNA-based therapeutics are an area of very, very strong growth for years to come. And that's why you're seeing this growth in NASD happening right now as well as our continued investments to capture more of that future growth. Immuno-oncology is an area of major investment right now, and that's why we went after the cell analysis business several years ago. So we expect those segments of the market to be really strong double-digit growers for many years to come. So I think that's part of the story there, which is to really have focused our investments and our portfolio towards those segments of the marketplace, which we expect to have even higher growth in the overall pharma market space. I think in general, we expect the biopharma R&D investments to continue the move to large molecule. When I get the question around LC replacements, the replacement cycle is always going on. And -- but what I do think is going to happen is, it's going to be stable, strong funding environment for pharma. So we're very optimistic about the long-term outlook for pharma. And I think it's a market I know we're betting on right now at Agilent.

And then my follow-up on that is, by our math, if you take the magnitude of the 1Q beat and then also the stronger FX tailwind for the rest of the year, that accounts for roughly $175 million of the raised fiscal year guide. And maybe you have these other items coming in. You mentioned the COVID test. You've got the -- all your comments on the strength in the current market. So where exactly is the downside risk? I mean, especially given the comps over the next couple of quarters, what are the areas we should be keeping an eye on that would keep you from doing something closer to 10%-plus quarterly?

Yes, it's a great question. And I think one of the things, we still are in the midst of the pandemic, right? There's still the variance out there. We haven't seen any impact of that to date, but those are some things that we're watching. And we haven't built any of the COVID testing that you just talked about into the numbers. So that would definitely be something that when we get those approved, that would be upside to this. And that's not all within our control. The development and those timings are within our control. But ultimately, that's a bet that both on the serology side as well as the qPCR side that we feel confident about, and that would be on top of these. And then as we talked about before, the variability potentially in the C&E market is more biased towards the upside as we think about the forecast going forward. And so we feel good about where we are. We're early in the year and...

We’re just one quarter in.

But we don't expect the momentum to abate.

Your next question comes from the line of Daniel Brennan from UBS.

I guess first question is maybe on China first, just I don't know if I missed it. Did you give what number or what growth rate you're assuming for the full year? And then within that, could you just discuss a bit more detail on the components of that, in particular, food, obviously, very strong this quarter. But how much more catch up potential is there in food, given how weak that business is then?

Yes. Let me take -- I'll take the first one, and then we can jump on and we can tag team, Mike, on the second one.

Yes, absolutely.

In China, we had forecasted roughly high single-digits at the beginning of the year. It certainly started much stronger than that. So we're expecting it be double-digits for the full year, really driven by both pharma and food. Those would be the two -- the upside drivers to our initial guide. And then I think on food, we've seen -- we saw stabilization really in the first half of 2020, saw an improvement in Q4. And that improvement continued here into Q1. And we would expect that to continue, given kind of the overall environment and sensitivity around food testing and so forth. But we're not quantifying how long or how much is left to catch up, so to speak.

Yes. I think also with food, I'm not sure I would really would use catch up describe this because, clearly, where you had some of the pharma companies just weren't having the research in and didn't work, had deferred investment, I think this has been part of the coming together of the new 5-year plan for China, and that's what's really driving this. So we would expect to see sustained investments, albeit not at this double-digit level. I think it's hard to know, Dan -- we've always felt this thing was not a market that was shrinking, wouldn't shrink long-term, which it had been for a few years, but it's more like a high single-digit longer term. And I think that's probably where we'd land, on your question, although I think we'll do double-digit for sure this year in '21.

Yes. We -- Mike, to your point, in our initial guide, we assume kind of a mid-single-digit as the recovery, and it's probably high single-digit to double-digit for the range for the full year.

Great. And then maybe just one follow-up on the NASD? What was the dollar contribution this quarter? What's kind of assumed in the full year? I don't know if you've changed that at all. And I know you've touched upon this, but in terms of other modalities besides interference, I guess, is that still -- it sounds like it's something that could possibly come, but we're still going to wait to hear from you guys on that.

Yes. What I would say, Dan, is we're at our full run rate capacity, which is, as we've talked in the past, $200 million a year. We hit that kind of where we expected to in Q1.

We're really happy with how that business is ramping.

And we're not done yet.

Hey, Bob, I would just add to that, that as I mentioned before, RNAi interference is our primary focus, but we are doing programs on Guide RNA for CRISPR, and we are at full tilt with that. But we are always looking to be in tune with new modalities. And if they're relevant, if they're sufficiently meaningful, we're definitely apprised of that as well.

Your next question comes from the line of Patrick Donnelly from Citi.

Mike, maybe one for you. Just on the chemical and energy side, certainly appreciate the conservatism baked in here. Can you just talk a little bit -- I know in the past, you've talked about kind of the shift from insourcing to outsourcing from customers and how that should play nicely into your strengths. Can you just talk about, I guess, where we are in that process and how big of an opportunity that is for you guys? .

Yes, I think we're still early days on that. I think it's -- that's part of the discussion. I think the investments that are going to happen this year, if they drop, are going to be more tied to deferred tech refresh. But I think it's probably more of a 2023 kind of -- excuse me, '22 event from the onshore and insourcing that we've been talking about. And I think this probably points to us being able to be able to sustain a mid-single-digit kind of end market. So it's -- I mean, it points to the fact that chemical and energy with these kind of longer-term outlooks coming from our customers will not be a drag on the overall growth rate, any material extended off. So I think it's an adder to the thesis that there is growth in the C&E market as well, albeit it can be a little bit -- it can move a little bit, depending on what's happening in the overall economy.

Okay. Now it's going to be the year of durability at least. And then maybe just one...

I like what you said, I should have used durability. How was the short to answer your question.

All good. I appreciate that. And then maybe just one on the academic side. Obviously, that's been lingering a little bit on the soft side, not only for you guys, but for much of the industry. I guess, where do you think we are there in terms of whatever metrics you guys look at, whether it's customers in the labs or whatever it may be? Maybe just kind of dive in that a little bit.

Yes. Great question. So when we’re talking to our team and our customers, here's our view of it right now. We think about -- if you think about 30% of the research labs are fully operational now, we think about 60% are working at reduced capacity. We think about 10% are closed. And we really think it's going to be -- all this is really tied to ability to get the infection rates down, to get the vaccinations out. I think until that changes significantly, we're expecting kind of more of the same, I'd say, Bob, for the -- until we actually see a change in the overall…

Yes, I think the real catalyst for us, Patrick, to Mike's point, is what's going to happen in the fall semester for classes?

Yes.

Are people -- are students going to be back full? Or is it still going to be at kind of reduced rates and so forth.

Yes.

So we're expecting continued recovery, albeit slow, really, and that's what we're looking at in addition to some of the kind of the macro levels.

I would say, though, that the conversation with customers is very robust right now. So it's just a matter of things opening up.

Your next question comes from the line of Steve Willoughby from Cleveland Research.

I had a follow-up question to Mike Ryskin's question as it relates to guidance, Bob. Maybe trying to ask it a different way. Have you really changed your organic or core growth assumptions over the remainder of the year? Because even in the first quarter here, you back out a couple of hundred basis points from sort of end-of-year budget spending. The first quarter still did basically twice what you were initially expecting for growth in the first quarter. And just looking to your guidance and doing some math, it looks like you really haven't made too much of a change for the organic growth over the remainder of the year. Is that fair to assume?

Yes. I would say we took Q1. We also upgraded Q2 and made some modest changes to the back half of the year, but most of that would be in the areas -- once we get further into the year, that would be an opportunity to revisit the forecast going forward. So I think bottom-line, you're in the ballpark.

Okay. And then just a follow-up question on diagnostics. So I guess 2 things to it. One, do you think we return to 2019 or normal levels in your non-COVID Diagnostics business this year? And then also, could you just provide a reminder on where you see your PCR test potentially fitting once it does come to market?

You want to take the first one and Sam the second one?

Yes. The short answer is yes, we expect it to get back, but again, latter half of this year. We're starting to see improvement. If you look at it by region, China is back. Certain pockets in Europe are back and certain places in the U.S. are back as well. But I think overall, it's probably going to be a few more months at least before it gets back to pre-COVID levels.

Yes. With regards to your second question on qPCR, for COVID-19, our master mixes, our instruments are already being leveraged as part of other testing systems by customers around the world. When our own test comes to market, we see the opportunity. There's still a dearth of robust testing solutions that are available. So we'll have the right performance going after the right fragments or looking at the right elements of COVID-19. And it's really about our broad ability to distribute, make it available and also something that could be automatable on multiple platforms. So we think we'll have a play.

Our final question today comes from the line of Paul Knight from KeyBanc.

So obviously, you've got a full array of products in the analytical instrument marketplace. And it goes back to, I think, Doug's question in terms of M&A, an opportunity. Where do you think you are in the full solution in cell analysis? Is there a lot to build? Is there a lot to buy in that particular market?

We think so. In fact, thanks for the question, Paul. You may recall -- and Jacob, feel free to jump in on this question as well. We teed up a fairly large -- although we're fully really proud of the business we've built so far, we think we have scale at a $300 million-plus business. We're playing in a much larger SAM. And we think there's both opportunities to further build out but also buy here as well. Jacob, your thoughts there?

Yes, certainly. We've been very intentional about how we build out our portfolio. Firstly, it’s with instrument platforms that we ensure we can get some footprint and a scale in the market. And the next thing that would be the -- logic next step is to look at content, how do we actually get content on our instrument portfolio. So that's clearly an area we're looking into. But I actually think with the footprint, there's also opportunity to add other technique modalities into that. So we are -- we have open eyes. We follow what we call the tale of strains -- strain for all. And -- but -- and we wait to put another firm on that strain. And so we are -- keep our eyes open and then see what happens.

And then the last question would be you had mentioned your cost-cutting program that had started in the second quarter of last year, where you are -- where are you in that process? And what happens to cost-cutting when travel and entertainment might come back kind of post-COVID?

Yes. We're seeing some of that. And some of that is lapping this quarter because we saw a significant drop, and so you're not seeing the year-over-year changes. We're not seeing it go back. And our goal is to not have it go back. So we think we're at a new watermark here in terms of spending, particularly in travel and some of these other areas. Now we are increasing investments in places like digital and some of these other places that are driving demand as well as some of the capacity that we talked about before. But certainly, in those types of things, travel and so forth, we're not looking for that to go back. It will go back some, but certainly not back to the way we have been doing business before. Customers don't want it, and we are not going to let it happen.

Absolutely. To Bob's point, as I spoke the other day to our global field team, and we were talking about embracing our new ways of working. And of course, a lot of people drove and love to be back on the road. But not everybody feels that way. And the customers certainly don't feel that way because we're much more responsive and attentive to their needs by using digital platforms, there is a place for face-to-face, but it has to be based on the customer need, not because we want to be in the road to be out there doing things in a very traditional way. So we're keenly aware of the question you posed, Paul, really challenged ourselves to make sure that we really continue forward with these new ways of working. And this allows us to put money into areas that really do matter to customers. So I'd rather invest there rather than travel and entertainment.

That concludes Q&A, and it also concludes today's Agilent Technologies First Quarter 2021 Earnings Conference Call. Thank you, everybody, for joining. You may now disconnect.