So, new products allow you to continue to have that conversation. And you see that reflected in our sort of pharma results outside of China and as you compare it to our peer group. Now, to your question on did we see an outsize replacement during the post COVID years? It’s very difficult to tell. We think it was more a push back from the depression that you saw during COVID and outsized execution that we saw due to the replacement cycle that we had not had from 2018 to 2020. So pent up demand sort of helped us get really outsized growth. Now, to corroborate that point, if you just look at LC, LC is 70% replacement business. And if you look at how we ended the full year 2023, so LC – and again, one should look at long term trends, on a long term basis, is roughly 1% growth on a four-year CAGR.
So LC is growing roughly 1% on a four year CAGR basis, which is well below the long term average of about 4% to 5%. And you add pricing, so it’s actually 4-ish-percent sort of below in volume versus the long term trend of 4% to 5% LC growth. So we do expect LC replacement to start imminently. Now don’t ask me exactly when that inflection point is. Short term, we have a ton of visibility with a lot of data and a lot of conversations with customers. Long term, we think the trends are going to revert back to the mean or even better, given what we’ve talked about in our prepared remarks. The inflection point you don’t get any extra marks to call it. So in 2024, we’ve assumed the same trends as 2023 to persist. But, definitely, we believe LC is due to come up in growth rates.
So, long answer, but I hope that gives you a lot of context on how we’re thinking about it.
Matthew Sykes: A quick one on PFAS. You mentioned that slide deck that the market is starting to expand into foods probably earlier than we had expected. Just given the potential size of the market, food relative to water, one, how big do you assume the food market to be over the long term? And two, how much of that 30 basis points annual contribution from PFAS actually comes from food relative to water in your assumptions?
Udit Batra: Early days, Matt. We’ve assumed roughly $50 million to $75 million for now in the food market. And over time, we expect it to expand. As you well pointed out, that could be a pretty significant market. We want to be a bit cautious here. So the 30 basis points is largely on the back of water testing, and not much from food testing at this point. But that said, the PFAS market is super dynamic. So we’ve gone from water testing to expansion into food testing, into tissue samples, into soil samples, into sewage, and into industrial companies sort of purchasing mass specs to analyze their effluent stream. So, it’s a market that’s going to significantly expand. But we’re a bit cautious in trying to guess exactly what that size is.
What we’re focused on is sort of going after each and every opportunity in these segments, and you see that with roughly 40% growth. So stay tuned. As we find out more, you’ll progressively see the increased market sizes or better information emerge.
Operator: And our next question comes from Rachel Vatnsdal with JPMorgan.
Rachel Vatnsdal: I just wanted to dig into this 1Q guide a little bit. This was weaker than most of us had anticipated. Appreciate the market is pretty dynamic and you had some really difficult comps in China during 1Q. But are there any other one-timers in terms of why you’d have that level of sequential step down? And was there any pull-forward that may have helped 4Q that led to that softer 1Q guide as well?
Amol Chaubal: The one-timers are largely in China. You had the stimulus last year in A&G. And the level of weakness we are seeing now in China, last year’s Q1 baseline doesn’t reflect that at all. In the rest of the world, we are assuming customers will be slow out of the gate versus what we typically see. And that’s based on the trend that we saw in Q4, where the budget flush was muted. And that will somehow, we think, reflect in how quickly budgets are released to customers. And that’s sort of playing out in the guide.
Udit Batra: Rachel, just to sort of build on what Amol has said, we’re really no different than what we saw in Q4 overall, right? Q4 was almost 7.5%, 8% down versus previous year. And we’re assuming, at the midpoint of the guide, Q1 is roughly 10% down. We expect, as Amol said, the trends from Q4 to persist into Q1. Low-single-digit-ish growth or flat growth in ex China. And in China, roughly 40% decline due to the heavy comps, especially from A&G last year where we had the benefit of the stimulus was coming through. So no real challenge. I’ll just sort of say one more thing. In pharma in China, in particular, we’re starting to see a bit of stabilization. We’re starting to see biotech spending start to reemerge. We’re starting to see CDMO spending on recurring revenues.
And we’re also, in the branded generics segment, which is roughly 50% of our pharma market, where more and more cities and more and more hospitals are starting to open up. So we see that trend, but we are cautious in calling that at this point in Q1. So Q1, basically similar tends to Q4.
Amol Chaubal: Just keep in mind, Q1 is our smallest quarter, right? So small changes have a meaningful impact on the pattern.
Rachel Vatnsdal: Just my follow-up on this assumed gradual improvement that you guys are embedding throughout the year, can you just dig a little bit more into those assumptions? Which markets and which geographies are you assuming more of an improvement than others? You talked about some of the China in the comping. So, how much do comps really have to do with that improvement that you’re expecting throughout the year as well?
