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Agilent Technologies Inc (A) Q3 2019 Earnings Call Transcript

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Agilent Technologies Inc (NYSE: A)
Q3 2019 Earnings Call
Aug 14, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Agilent Technologies Third Quarter Earnings Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions].

Thank you. And now I would like to introduce you to the host for today's conference, Ankur Dhingra, Vice President of Investor Relations. Sir, please go ahead.

Ankur Dhingra -- Vice President of Investor Relations

Thank you, Mike, and welcome everyone to Agilent's third quarter conference call for fiscal year 2019. 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 Mark Doak, President of Agilent CrossLab Group.

You can find the press release, investor presentation and information to supplement today's discussion 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. 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 July 31st.

We will also make forward-looking statements about the financial performance of the Company. These statements are subject to risks and uncertainties and are only 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 McMullen -- President and Chief Executive Officer

Thanks, Ankur, and thanks everyone for joining our call today. Our Q3 results exceeded our expectations. The Agilent team delivered total revenues of $1.27 billion, up 6% on a core basis. Our EPS of $0.76 is up 13%. Both our top line revenue and EPS are above the high end of our guidance range. This marks our 18th consecutive quarter of adjusted operating margin expansion. In July, we also announced the pending acquisition of BioTek, which would be our largest acquisition since the 2015 launch of the new Agilent. We continue to invest for growth even amid market uncertainty. At the same time, our Agilent business system continues to drive operational improvements.

Our excellent overall Company growth is being driven by two factors. First, strengthen the global pharma market in both small molecule and biopharma; secondly, geographic strength in the US across most end-market segments. China growth was generally in line with expectations. Business unit performance is led by double-digit growth in our Agilent CrossLab and Diagnostics and Genomics Group.

Let's take a closer look at the performance of all three of our business groups. I will start with ACG, our Agilent CrossLab Group. The ACG business continues its trajectory of consistently strong results with 11% core growth. This growth was broad-based across all market segments and regions. Our service business grew at a double-digit rate as we continue to see higher demand for our expanding portfolio, both from current and new customers. We see a continued secular trend of customers seeking to drive increased productivity and to outsource non-core services in the lab. Our services offering puts us in a leadership position to benefit from that trend.

Our consumables business also grew double digit. We continue to introduce highly differentiated consumables to address important customer challenges and significantly improve the user experience, especially in high growth markets like biopharma. I'm very pleased with the continued positive impact on total company results from the Agilent's CrossLab strategy. Our consistent results speak to the strong execution from the Agilent team and the value it bring to our customers. We're meeting the ever-increasing demand from our customers and we see the tax rates to our installed base of Instruments consistently improving.

Now turning to DGG, our Diagnostics and Genomics Group business. DDG's growth momentum continues with strong 13% core growth. The growth is broad based across pathology, genomics and our NASD businesses. Let me share a few additional comments on our NASD business. NASD turned in a very strong third quarter as we can see increase in demand from our customers clinical trials. As a reminder, in June, we opened our second production facility located in Frederick, Colorado. We remain on track to start commercial shipments this quarter. We also announced that we purchased our previously lease site in Boulder, Colorado. These two facilities enable Agilent to meet the growing demand for development of RNA-based therapeutics and continue to be a partner of choice to both pharmaceutical and biotech companies.

Now moving to -- onto our LSAG, our Life Sciences and Applied Markets Group business. LSAG's revenue is flat year-over-year on a core basis and in line with our expectations. Strength in the pharma, environmental and forensics markets was offset by chemical and energy declining against a very tough 12% compare and expected weakness in the China Food market. As you know, in Q2, we discussed three areas that impacted LSAG growth rates. Let me give you an update.

First, starting with the 4 plus 7 initiative in China. We saw sequential improvement in demand from generics manufacturers. This is driven by business coming from the winners of the first 4 plus 7 pilot, resulted in growth in our instruments business. We have deep relationships in history of these customers. While the progress is expected to expand over the rest of the calendar year, we see incremental regulatory clarity ultimately drive and increase production volumes in a favorable long-term investment environment.

Second, the China Food market conditions remain the same as last quarter and in line with our expectations with revenues flat to Q2. The business from government owned labs remains muted while commercial testing labs activity is increasing. We are expecting similar overall market conditions this coming quarter as well. Finally, the global small molecule pharma business outside the China saw improvement in demand relative to Q2. We saw budgets free up and LCD replacement is taking place in some of our large accounts, as well as the addition of new customers. While macroeconomic and political conditions are creating market uncertainty for capital investments, I'm quite confident in our ability to take market share in whatever market environment we encounter. We have an industry-leading portfolio and are not sitting still. We continue to invest in new offerings end markets.

One of these new market investments is the pending acquisition of BioTek. As I mentioned earlier, this quarter, we announced our intent to acquire BioTek, a global leader in design , manufacture and distribution of innovative cell analysis instrumentation. I'm very excited by the significant step forward in strengthening our leadership position in the fast growing cell analysis space. Our strategic focus there began with the purchase of Seahorse Bioscience in 2015 and was followed by the acquisitions of Luxcel Biosciences and ACEA Biosciences in 2018. By combining BioTek's offering with that, we will create a business with revenues greater than $250 million per year, up from 0 four years ago, this business is growing double-digits today.

Looking ahead, we will now be able to deliver a breadth of differentiated workflows, enabling customers to obtain deeper, more reliable insights across a variety of cell analysis applications. This is yet another example of how we invest in new, high growth markets where we can leverage core Agilent capabilities and our One Agilent culture. The culture and portfolio with [Phonetic] BioTek are extremely well aligned. We share the same core values and have very similar cultures with a genuine focus on our customers and teams. I look forward to welcoming the BioTek team into the Agilent family. We expect the acquisition to close later this fiscal quarter.

We also continue to bring new and innovative offerings to the market across all of our businesses. These new offerings are consistently drawing very strong interest from both new and existing customers. For example, earlier this year we launched major updates to our gas chromatography, spectroscopy and genomics portfolio. In addition, in Q3, we had an excellent showing at the ASMS Conference, highlighted by the launch of the new Agilent InfinityLab LC/MSD iQ System. This new system incorporates designed-in smart features, software and hardware developed specifically for chemist and chromatographers. Our new LC/MSD iQ System is a single quad mass spec, built on the revolutionary Ultivo LC triple quad-core technology platform. We also launched a brand new Agilent 6546 LC/ Q-TOF system that provides analysts ability to simultaneously acquire high resident data across unprecedented dynamic range.

In addition, during the quarter, we introduced a new Agilent 6495 C triple quad LC/MS system that provides industry-leading precision in complex matrices. And finally, we introduced a new Agilent Bravo sample prep system for metabolomic analysis of human plasma samples. This new offering further strengthens our leading position in metabolomics. We also brought to market the first outcome of our joint development work with the newly combined Agilent and ACEA teams. At the CYTO 2019 conference, we introduced the NovoCyte Advanteon Flow Cytometer. This new offering addresses today's high end and increasingly sophisticated multicolor flow cytometry assays. It provides unsurpassed sensitivity, resolution, detection speed and flexibility of western channel.

In addition, the number of indications from our PD-L1 diagnostic assay continue to expand. In Q3, we received FDA approval for two new indications. Our PD-L1 diagnostic will now be used as an aid in identifying patients for treatment with KEYTRUDA in a total of six cancer types. While making all these investments and launching new products, we continue our trajectory of margin expansion by 90 basis points versus last year. Our agile Agilent system of continuous process improvement and disciplined cost management keeps the team focused on finding and execute them on new opportunities.

A few closing comments on our Q3 results and company transformation has been under way for several years. Looking ahead, we continue to see uncertainty and a challenging market environment in some end markets for capital instrument purchases. This quarter's results again demonstrate Agilent's ongoing transformation toward higher growth markets in an increasingly resilient business model with a higher mix of recurring revenue streams. Given our Q3 results and outlook, we are raising our full year guidance for earnings as well as revenue growth at the midpoint of guidance. Bob will describe this in more detail.

Before I turn it over to Bob, I'd like to leave you with a few -- a couple of thoughts here. At the close of our Q2 call, I commented a great company do not just react to market conditions, they see market opportunity. At Agilent, we will continue to invest for growth and take market share in whatever market conditions we encounter. We're continuing to drive productivity and we're doubling down our efforts to be a more agile company. We will continue to leverage our strong balance sheet to invest in the business and return capital to our shareholders. I'm quite confident that our Company has never been stronger and we are well positioned to drive continued growth and earnings expansion in an increasingly uncertain global economy.

Thank you for being on the call, and look forward to answering your questions. I'll now hand off the call to Bob. Bob?

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Thanks, Mike, and good afternoon everyone. In my remarks today, I'll provide some additional detail on revenue, walk through the third quarter income statement and some other key financial metrics and to discuss our capital deployment during the quarter. I'll then finish up with our updated guidance for Q4 and full year. Unless otherwise noted, my remarks will focus on non-GAAP results.

As Mike said, our third quarter results were very good as we had strong execution across a number of fronts. Revenue for the quarter was $1.27 billion, with core revenue growth of 6.2%. Reported growth was 5.8%, with currency negatively impacting revenue by 1.9 points and acquisitions adding 1.5 points to growth. In terms of end markets, pharma, diagnostics and clinical, and environmental and forensics led the way for us in the third quarter. Pharma, our largest market grew 13%. Strength was broad based across the instruments, services and consumables, as well as NASD. Our biopharma business continues to grow at double-digit rates and we saw good growth in the small molecule business as well, both in instruments and recurring revenues.

Our environmental and forensics business grew 15% on a core basis in the third quarter, albeit on an easier compare. As with the second quarter, our forensics strength is tied to demand for expanded lab capabilities. This is a result of the ongoing global opioid crisis which is driving increased sample testing and broader screening requirements. Our environmental business grew high single-digits, again driven by the ongoing expansion of testing in China. Diagnostics and clinical core revenue grew 7% during the quarter, driven by strength of our pathology and genomics businesses. Chemical and energy revenue grew 1% against a very tough compare of 12% growth from Q3 of last year. Results were driven by continued strength and services in consumables. Academia and government declined 5%, largely due to order timing and rounding out the discussion of end markets. Food revenue declined 3% driven by China coming in as we expected, and as Mike discussed.

On a geographic basis, we again saw growth in all regions, led by the US growing at double-digit rates, with strength across all three businesses. China grew 1%, generally in line with our expectations, primarily due to the weakness in food. If you exclude food, growth in China was 6%. Asia outside of China also grew at a double-digit rate, driven by growth in Japan and South Korea. Europe grew 3%, in line with our expectations as the market environment remains subdued.

Now turning to the rest of the P&L. Third quarter gross margin was 56.4%, essentially flat year-over-year with tariffs impacting gross margin adversely by 30 basis points. We've been able to mitigate the impact of tariffs through discipline and cost management, and the ongoing focus on efficiency. Our operating margin was 22.8%, up 90 basis points as revenue growth outpaced growth in operating expenses. Year-to-date, our margins continue to expand as our teams have executed strong expense discipline. And as a result, non-GAAP EPS for the quarter came in at $0.76, $0.03 higher than the top end of our guidance and representing 13% growth.

In addition to our operating performance, we are very active in deploying capital during the quarter. In Q3, we returned $600 million to shareholders. We bought back shares worth $549 million, totaling 8 million shares, and paid $51 million in dividends. As Mike mentioned, we also signed a definitive agreement to acquire BioTek Instruments and expect the deal to close by the end of our current fiscal fourth quarter.

So year-to-date, including BioTek, we've committed to deploying over $2.2 billion in capital this year. Of that, $1.4 billion was spent in growth acquisitions with ACEA and BioTeK, expanding our cell analysis franchise. We have also returned over $800 million through dividends and share buybacks. Our balance sheet today remains healthy and we continue to look for opportunities to add growth assets to our portfolio.

Now turning to the cash flow. We generated $242 million in operating cash flow and ended the quarter in an effectively cash neutral position.

Now let's turn to our non-GAAP financial guidance for the year -- fiscal year. As Mike mentioned, with the strong results in Q3 and our outlook for the fourth quarter, we are raising our full-year revenue and EPS guidance. Please note that our guidance does not include any impact from the expected BioTek acquisition. For the full year revenue guidance, we're increasing the lower end of our range, thereby increasing the midpoint, resulting in a new range of $5.105 billion to $5.125 billion, representing 3.9% to 4.3% reported growth. Currency is expected to be a headwind of roughly 200 basis points, partially offset by M&A contributing 150 basis points. As a result, we're now expecting core revenue growth in the range of 4.4% to 4.8% for the full year.

With the strong execution, we've seen in terms of our business strategies, we're raising our full-year earnings per share guidance to a range of $3.07 to $3.09. This represents growth of 10% to 10.8% for the year. And now turning to the fourth quarter, we're expecting revenue in the range of $1.31 billion to $1.33 billion, representing reported growth of 1.2% to 2.8%, and core growth of 1.5% to 3%. Currency is estimated to be a headwind of roughly 100 basis points, partially offset by M&A contributing roughly 70 basis points to 80 basis points of growth.

Fourth quarter non-GAAP earnings are expected to be in the range of $0.84 to $0.86 per share, which is 3.7% to 6.2% reported growth versus a year ago. Also of note, the newly announced tariffs on the additional $300 billion of US imports from China is not expected to be material for us, and the share count for Q4 is expected to be 313 million shares.

Now, before opening up the call for questions, I'd like to conclude by saying that Agilent's resilient business model is built for the long-term. We believe we are focused on the right strategies that will continue to serve us well and ensure solid shareholder value long into the future.

And with that, Ankur, back to you for the Q&A.

Ankur Dhingra -- Vice President of Investor Relations

Thank you, Bob. Mike, if you can please provide instructions for Q&A.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Derik de Bruin from Bank of America Merrill Lynch.

Derik de Bruin -- Bank of America Merrill Lynch -- Analyst

Hi, good afternoon.

Mike McMullen -- President and Chief Executive Officer

Good afternoon, Derik.

Derik de Bruin -- Bank of America Merrill Lynch -- Analyst

Hi. Mike and team, can you talk a little bit more, obviously, the China numbers the 4 plus 7 tailwind, here it seem to be a little less in the quarter. Can you talk a little bit more, I mean, you mentioned spending, and I guess, it's like -- how are you sort of thinking about spending patterns now as the second wave kicks in. Just a little bit more color seeing there. And then, as a corollary question, there is -- there's obviously a lot of changes going on the drug manufacturing space right now with some consolidation going on, obviously some M&A into the ones, like how you sort of thinking about some the changes going on into the bigger generic players, some of the consolidation space, I guess, how will you position those markets?

Mike McMullen -- President and Chief Executive Officer

Yeah, sure. Let me -- I'll take the first one and Jacob, you can -- I'll pass the second one to you. So first of all, as we've talked in last call, we had seen a pause in our second quarter as it related to the roll out of the 4 plus 7 initiative. But at the time we said, listen, we've actually did a good thing long-term and eventually will lead to increased investments once we start to sort out who the winners are. So -- and that actually is how the quarter developed for us where we actually saw the winner starting to invest and we think that level of investment relative to way one, we will continue through our fiscal year.

As it relates to the core of your question which is, how about round two, our view is that they will be going through a process of doing the bidding and sorting out the winners over the latter part of this year and the impact on the business is more in FY '20, kind of, impact in terms of what we're going to see in China. But again, at this point, we think these are good long-term developments for our business here because of the strength of our relationships and there are real emphasis on productivity and compliance.

And then Jacob your thoughts around the -- questions about the industry, consolidations and generics?

Jacob Thaysen -- Senior Vice President, Agilent President, Life Sciences and Applied Markets Group

Yeah, I think that's a really relevant question. And clearly with some of the winners coming out now in China, I think, we will see some consolidation. I think actually we will be in a very good position in that space, both in China and in general as we have very strong relationship with many of the larger and winners in the generic space. So when this happened, which is a part of the normal pharma cycle, we are ready to support them and make them successful.

Mike McMullen -- President and Chief Executive Officer

Yeah. And Derik I just some put a period on this one, which is whether the generic consolidation is happening in China and other parts of the world, we think overall the productivity message and real value we can deliver to this segment -- the market really, really resonates with them.

Derik de Bruin -- Bank of America Merrill Lynch -- Analyst

All right. Thanks very much. I'll get back in the queue.

Operator

Your next question comes from Ross Muken from Evercore ISI.

Ross Muken -- Evercore ISI -- Analyst

Good afternoon, guys. I guess maybe just digging a little bit on DGG, right. I think the performance there was kind of notably strong, and so you called there a couple of things, including NASD which seems like it's starting to ramp, but also a bit on opioids, and then -- and then on these sort of array side, but academic was we -- just give us a little bit of a picture kind of the magnitude, maybe some of the outperformance in some of these pieces and then how to think about that cadence may be into the -- in the context of sort of the fourth quarter guide?

Mike McMullen -- President and Chief Executive Officer

Sure. Sure, Ross. I'll make some initial comments here, then Sam Raha, you can jump in and correct me if I'm off target here. But one of the message that we were trying to convey in our earnings call, which is while the NASD growth was very strong in the quarter that wasn't the only bright spot in DGG. It really was across the Board, whether it be in our pathology business and we think we're putting up numbers that are growing faster than the market, whether it be because of the increase acceptance for automation platform, the Omnis, the continued utilization of -- an expansion of the PD-L1 assay. On the genomic side, we saw good growth in our NGS-related business. Sam, I think that was probably double-digit for us for the quarter, and then lead for the NASD strength which we think is here to stay. Looking into the fourth quarter, we were kind of thinking something like high-single digits I think for this business.

And Sam, anything else you want to add there, because the only message [Phonetic] going across was broad-based strength.

Sam Raha -- Senior Vice President, Agilent President, Diagnostics and Genomics Group

No. I think Mike you really outlined where the businesses is. Pathology, it's a business that's built over time, right, it's not just about a single quarter, but it is the combination of the assays that we have, the increasing number of indications, PD-L1 related that we announced two of them, approval from the FDA, but it's also the ongoing growth in our installed base, be it of Omnis, be it of other platforms. In our companion diagnostic business, which a lot of it feeds into that is also -- it's performing in a really healthy way. In the genomics business also, as you said, it performed well, but that's broad-based around the world. So we're -- we're pleased to see that both in terms of genomics related instruments like the platforms that we have for TapeStation, Bioanalyzer, the AATI product categories. So we feel good about the performance in the coming quarter too.

Mike McMullen -- President and Chief Executive Officer

Thanks, Sam.

Ross Muken -- Evercore ISI -- Analyst

And then maybe just on the C&E side, I mean, obviously you called out tough comp, but lot of macro volatility in the last few weeks, lot of things happening on the trade side, I guess, how are you trying to interpret sort of all the key leads in that sub segment, as you -- you've had some good underlying product cycle, but obviously there is some instability just broadly. And so how do you feel like aside from sort of competing well in whatever market there is about sort of what that actual end market environment is going to look like for the next quarter or two?

Mike McMullen -- President and Chief Executive Officer

Yeah. Great question, Ross. This is something we've spent a lot of time here inside the company talking about. And kind of entering into this year, we had some concerns about the chemical energy market just in terms of -- there's a lot of -- there is macro noise even coming into our fiscal years. I think we got it like, kind of, low single coming in to the year, but as you may recall on our first guide, after we raised the guidance, hey, this could be a source of upside. Well, clearly, that is not happening. So we're still assuming kind of low single digits, but probably negative growth in instruments, because even though the product cycles are really strong, I think we're well positioned to win when money's there, but we're still going to assume for the -- at least the rest of this fiscal year that will be growth in chemical energy, but overall, that will be driven by the strength of our ACG business and we expect demand to be pretty muted if you will in the C&E.

And Bob, maybe take them a quick look at this -- deep look at this and let me have some quick comments.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Yeah, I think that's right, Mike and Ross. Thanks for the question. If you look at our Q4, I think we're trying to be prudent in our forecast certainly with continued strength in our ACG and DGG businesses, but the LSAG or the capital business is going to continue to have slow growth. And capital in the C&E area is one of those -- one of those markets that we're looking at. And certainly with PMIs, the way that they are, and as you say, the uncertainty in the market certainly isn't helping. And so, we think we've tried to take that into account for our fourth quarter. The new products that Mike mentioned didn't have a material impact on the quarter, but the ones that we've launched, the gas chromatography and so forth, continue to have very positive uptake, but it's -- the market is slower, kind of -- and it's kind of playing out the way we expected at the very beginning of the year.

Mike McMullen -- President and Chief Executive Officer

I guess, if there is one silver lining in terms of -- which is again back to this productivity message and the fact that we now have a fleet of really great new products and there is real productivity benefit to the customer, they're in a stronger position to go to their management and get support from investment, because it does really help their P&L.

Ross Muken -- Evercore ISI -- Analyst

Perfect. Thanks, Mike.

Mike McMullen -- President and Chief Executive Officer

Welcome Ross.

Operator

Your next question comes from Tycho Peterson from JP Morgan.

Tycho Peterson -- JP Morgan -- Analyst

Hey, thanks. Mike, can you talk a little bit about the global pharma picture. You cited delays last quarter and now you're saying kind of budget freed up. So how much of the 13% growth you saw was just kind of catch-up from last quarter and how you're feeling about sustainability of that going forward?

Mike McMullen -- President and Chief Executive Officer

So I'll let Bob do a little math on the catch-up, but let me make some macro comments while you're doing your mental math. But as we pointed out in Q2, we said, hey in Q2, biopharma really is quite strong. By the way, strong and even stronger this quarter. But we said, hey, we saw a pause in the small molecule side outside of China and we talked a lot already about the 4 plus 7, but -- and it really was kind of curious with something, what was going on with our large accounts in US and Europe. But I think there it is being prudent in their budgeting process and we saw -- we lease funds in the -- in our third quarter and we're expecting that to continue. So we don't see that as being a one quarter -- one quarter phenomena, albeit, that's why we tried to use the words in some end markets we're expecting some pretty challenging market conditions. So pharma actually we think is going to continue to be a source of growth on the LSAG instrument side, while we expect some markets to actually be down year-over-year.

And Bob, I don't know how we can [Speech Overlap] catch-up.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Yeah, I think, Tycho, the way I would talk about it is, as I mentioned, the pharma business grew 13% in the quarter. And if you look at small molecule, it was mid-single digits. So there was -- there was probably some catch-up, but I wouldn't say it was material that mid-single digits is kind of where it has been historically over the last several quarters. So I think it -- what we have said and kind of the hypothesis has been, that's primarily a replacement cycle. They can hold off for a number of quarters, but they can't do that forever if they want to keep their manufacturing processes in place. And so we think we are in that -- it wasn't a snap back, so there wasn't more in Q3 than what we saw. But I think it was now they're getting further in the fiscal year and they're actually spending that money.

Mike McMullen -- President and Chief Executive Officer

Sort of back to historical run rates wouldn't you agree, Jacob?

Jacob Thaysen -- Senior Vice President, Agilent President, Life Sciences and Applied Markets Group

Yeah, I think that's correct. But we do see that the larger account are still very conservative in the procurement while some smaller -- pharma actually is investing these days. So that's why we actually see some of the growth coming from also and we are taking good share there.

Mike McMullen -- President and Chief Executive Officer

Yeah, thanks for the build there, because in my narrative I talked about the business coming not only from existing customers, but new customers, and we've been very aggressive in that regards as well.

Tycho Peterson -- JP Morgan -- Analyst

And can you provide a lot more color on the academic quarter timing that drove the decline in academic?

Mike McMullen -- President and Chief Executive Officer

You know, Bob, I'm not sure we have much more insight -- that business tends to be lumpy for us, right.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Yeah, it's -- as you know, it's a -- it's a relatively -- it's the smallest piece of our business and it goes up and down. And so we're not going to call out any one particular order or orders across the business, but we feel good about our position there going forward and we're expecting that to return to growth in the fourth quarter. I will also say back on the year on the pharma business, when we look at our ability, I think, one of the things that speaks well to our value proposition with our customers is, when you look year-over-year, our pricing actually has held up pretty well. Our pricing is roughly -- it's slightly above on the LSAG business. So I think that speaks to the value that we are able to bring from a productivity standpoint to customers.

Mike McMullen -- President and Chief Executive Officer

Hey Bob -- back on academia and government, maybe I'll just [Indecipherable] we've inside the company which was we're now a little bit concerned about this, because we still see the funding environment is actually being quite strong and stable. So it's just a timing issue. So we don't see anything happening materially different in the marketplace.

Tycho Peterson -- JP Morgan -- Analyst

Okay. If I could ask one last clarification before hopping off. On China 4 plus 7, do you expect the impact to be the same magnitude next year as it is this year given that it's different rules for round 2. I wasn't sure from your commentary --

Mike McMullen -- President and Chief Executive Officer

So Tycho, I'm going to resist the temptation to do in FY '20 guide, but I would say, directionally, it's going to be an increase.

Tycho Peterson -- JP Morgan -- Analyst

Okay. Thank you.

Operator

Your next question comes from Brandon Couillard from Jefferies.

Brandon Couillard -- Jefferies & Company -- Analyst

Thanks. Good afternoon.

Mike McMullen -- President and Chief Executive Officer

Hi, Brandon.

Brandon Couillard -- Jefferies & Company -- Analyst

Mike, just starting with the China Food business, you sort of just give an update on where you stand as far as building out some of your commercial teams to go after that private lab channel in China, sort of, your general visibility now today relative to maybe where you were three months ago?

Mike McMullen -- President and Chief Executive Officer

Yeah, happy to do so. So we're fully built out. So we've been working this probably well over a year or 15 months, because I think the first time I started talking about this was Q2 '18 call. So from a channel -- reach channel perspective, we're there both in terms of our direct reach, but also through some of our digital enablement of customers. So we feel really good about our channel reach and relationships with the commercial accounts and we're seeing in the numbers. So we're seeing really -- it's really a tale of two cities.

And Jacob, I have you jumping on this one. Well, the second, I know you've been digging into this, but sort of tale of two cities, we're getting good growth in the commercial. There is just no real new investment happening on the government lab side of things.

Jacob Thaysen -- Senior Vice President, Agilent President, Life Sciences and Applied Markets Group

Yeah, that's true, Mike. And we do see double-digit growth on the contract labs these days, but coming from a smaller base and while, so we have a very large market share in the -- in the government account. So clearly, when the catch-up is happening, I actually believe you will see a very strong growth in this business again.

Mike McMullen -- President and Chief Executive Officer

Right, if there's any silver lining, it would be as Q3 was as we expected. So we weren't surprised by the number albeit down.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Yeah and as we're thinking about Q4, we're expecting Q4 to be, kind of, play out the way Q2 and Q3 did in terms of roughly at that 40-ish million dollar revenue run rate.

Mike McMullen -- President and Chief Executive Officer

Right, which you know looking at our -- I think we clocked a 16% growth overall in China of Q4 last year. So obviously up against a tough compare.

Brandon Couillard -- Jefferies & Company -- Analyst

And then maybe one more for Mark Doak. The gross margins in the CrossLab business are up pretty substantially year-over-year, I think the new high is 52%. Sort of speak to the drivers of that gross margin improvement and sort of what -- what you see is the mid-term runway, mid-term opportunity for gross margins? Thanks.

Mark Doak -- Senior Vice President, Agilent President, Agilent CrossLab Group

Sure, I'd be glad to. And if you pull us back, its -- several thing is contributing to it. Over time, mix has been a play in terms of our consumables business being from a margin perspective, north of the company average. But also, a lot of work we're doing is relative to some of the Agilent programs, but specifically looking at deliver efficiencies in our services team. We've been able to add a lot more revenue without a lot of proportional cost to that. And that comes to really what we're seeing increasing as a big factor in our margin expansion and scale. And we're in that position now where we can invest. Mike had talked about some of our digital capabilities, both in the channel but also in the back office areas. And it starts to fuel these efficiencies and we can reinvest some of those profits to building more strength in the areas. So it's really eating off itself, as you will. And when you pull altogether between portfolio mix, continued to move toward scale and driving efficiencies through these digital capabilities. So these are probably the big drivers behind it.

Tycho Peterson -- JP Morgan -- Analyst

Very good. Thank you.

Mike McMullen -- President and Chief Executive Officer

Thanks, Mark.

Operator

Your next question comes from Puneet Souda from SVB Leerink.

Puneet Souda -- SVB Leerink -- Analyst

Yeah. Hi, Mike. Thanks for the question.

Mike McMullen -- President and Chief Executive Officer

Hey, Puneet.

Puneet Souda -- SVB Leerink -- Analyst

Thanks. So first one on the cell analysis market. I mean, with your recent acquisition of BioTek and obviously you've added Seahorse and ACEA before. Do you think you have enough pieces here to sort of ultimately serve this growing and expected to be even further growing cell therapy development market and -- or do you see more room for further capital deployment here. And I should say that this did increase your biologics exposure in some ways and it's likely to increase that. So I just wanted to get a sense of what you have currently and should we expect more here?

Mike McMullen -- President and Chief Executive Officer

Yeah, so let me start this off and then Jacob feel free to chime in as well. So we think now at $250 million, we have a business with scale. And I think that's really important to, say, we think really compete and we are really bullish on this space and I think our investment stream started several years ago. So while we are still in the process of digesting what we've just recently acquired and then we have to bring the Agilent -- into the Agilent family, the new BioTek team. So we think we have a lot of really good scale once we close with the BioTek acquisition. But that being said, I think we have further aspirations to continue to build out in that space as well.

Jacob Thaysen -- Senior Vice President, Agilent President, Life Sciences and Applied Markets Group

Yeah, and building on that, I think, first of all, we clearly have scaled this today, but what is very important here is that the strategy we started out some years ago, four years ago now was not just to build scale in the cell analysis business, but build differentiated components that could build together into workflows that would really do differentiate -- really provide differentiating information for our customers. So not only have flow up against flow and you know some -- paid, we combine them together with a particularly important immuno-oncology space and especially here in the CAR-T space. We've seen that already happening. So before actually the acquisition of BioTek, we used the Seahorse and the BioTek and collaborator between the two companies to provide a workflow that combine those two technologies together in the same software and the same macro side of plate and we saw that that actually grew the market opportunity significantly. So now combining the Seahorse, ACEA, BioTech and Luxcel together, I think we have a really, really strong differentiated position, but it also allows us to add more workflows into that space going forward. But our main priority right now is to integrate and be successful with BioTek.

Mike McMullen -- President and Chief Executive Officer

And Puneet, I could just say, revenue synergies is often theoretical. When you do an acquisition, we've actually have real proof points already with customers and market that we can do this and there is real value to customers.

Puneet Souda -- SVB Leerink -- Analyst

Okay. Great. Thanks for the details. If I could touch on the NASD business, I just wanted to get a sense of, if you could quantify how much was that sort of in the quarter and the current run rate that you have and sort of what -- what's your expectation longer-term here, how has that changed from the sort of the earlier expectation and comments that you gave around customers demanding the iron out product and the overall long-term view of the business? Thank you.

Mike McMullen -- President and Chief Executive Officer

Yeah, much like with the temptation to talk about FY '20 guide, I also we've a tempt to talk about specific details on our product line level, but what I can do is give you a directional numbers. So I think we've been talking about this business hitting probably $100 million or so this year. And then as we look into FY '20, we've added at least that much in terms of a capacity, so we hope to be up to a larger number in the -- by the end of next year at the sort of a run rate level at a higher number. We won't -- we're not ready to kind of commit to what the number is actually is, but it's going to be putting a nice step-up for us. And Bob, I know you're been doing some modeling in this area as well already?

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Yeah, I think Puneet, I mean nothing has changed. We had a very good quarter. We expecting another very good quarter next year -- our next quarter, excuse me, largely on the back of our existing capacity and the team has just done a fantastic job. As Mike said, we're on pace to deliver in that $100 million consistent with what we said really since the beginning of the year and we're excited about the new facility coming online. And as Mike mentioned, it's bringing on manufacturing capacity right now and look forward to '20 and beyond serving our customers.

Mike McMullen -- President and Chief Executive Officer

And by the way, don't interpret my comments. I have been any less bullish in this space. We just know that as we bring on the new facility, you have the time when you actually can start the batches out, but a lot of that's being driven by customer's timing of when they're doing the clinical trials. So we're much more specific when we do our FY ' 20 guide because we'll have a much better handle on the timing of when these new customers will be coming into our new facility. I can tell you we've sold a good percentage of that capacity already.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

So, Mike, maybe if I could just add one thing?

Mike McMullen -- President and Chief Executive Officer

Amateur baby.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

One thing that we've already stated is the basis of this as the number of clinical trials and work being done here, we see the supplier opportunity for us going from $0.5 billion market to over $750 million over the next several years. So we're going to grow with that and it is a fact too that we are doubling our overall capacity for manufacturing, but I just want to reemphasize what both Mike and Bob said that there is a ramp-up process over a number of years. So just because we're doubling our capacity, it doesn't mean we're going to double our revenue there. Just to be explicit about that, again. But we will be very [Speech Overlap].

Mike McMullen -- President and Chief Executive Officer

New one.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Yeah, exactly, a new one.

Puneet Souda -- SVB Leerink -- Analyst

All right. Thanks. Very helpful, guys. Congrats on the quarter.

Mike McMullen -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from Catherine Schulte from Baird.

Catherine Schulte -- Robert W. Baird -- Analyst

Hi. Thanks for the questions. First, I was just wondering can you go into a bit more detail on your strong results in environmental and forensics. I think this is the fourth quarter in a row of high-single digit or double-digit growth there. So I'm just being curious to hear more details on the drivers in that end market?

Mike McMullen -- President and Chief Executive Officer

Catherine, I think I'm actually going to pass this to Jacob who is --

Jacob Thaysen -- Senior Vice President, Agilent President, Life Sciences and Applied Markets Group

Yeah, I mean, -- and again, it speaks to the portfolio we build up here over the past years on really robust, reliable instrumentation that allow us to really go into, of course, opioid is a big crisis here in US. So we have actually quite a large growth in that area. We also seen soil and water here in US, which have actually driven lot of business. And the same token in China has actually continued to have strong growth in both those areas, specifically the environmental which is heavily regulated. So in -- we are doing very well in regulated basis and this has driven also the environmental and forensic this quarter.

Mark Doak -- Senior Vice President, Agilent President, Agilent CrossLab Group

Yeah. And I think it's fair to say --

Mike McMullen -- President and Chief Executive Officer

Go ahead, Mark.

Mark Doak -- Senior Vice President, Agilent President, Agilent CrossLab Group

I was going to say, if I could add to that too. In concert with Jacob, we've been working a lot on the environmental side in terms of the end market workflows and complementary consumables and services to go along with it. So that's clearly another driver of this end market for us.

Mike McMullen -- President and Chief Executive Officer

Yeah.

Catherine Schulte -- Robert W. Baird -- Analyst

Okay. And then we heard one of your peers talk about starting to see a bias against US companies and in some China tenders. Are you seeing signs of that dynamic as well?

Mike McMullen -- President and Chief Executive Officer

Catherine, thanks for asking that question. Not at all, So that's always been the risk of the heightened tensions between US and China as it relates to trade. We have not at all seeing that in our business.

Catherine Schulte -- Robert W. Baird -- Analyst

Great. Thank you.

Mike McMullen -- President and Chief Executive Officer

You're welcome.

Operator

Your next question Doug Schenkel from Cowen.

Doug Schenkel -- Cowen and Company -- Analyst

Hey, good afternoon guys. I only have one question, but it has three or four part. So I know -- I don't want to disappoint. So I know you're up against the tough comp in Q4 and I'm guessing there is some desire to be a bit more conservative in the current environment. That said, given the strength of really ACG and DGG in Q3, and really the past few quarters, we would have expected Q4 revenue growth guidance to be a bit higher. So one, were there any timing dynamics that benefited Q3 at the expense of Q4. Two, did you see any end market conditions weaken over the course of Q3, and if so, are you baking in an assumption into guidance that this continues in the fourth quarter. Three, are you assuming that LSAG growth is lower in Q4 versus the flat performance in Q3, because it seems like you'd have to unless you're expecting ACG and/or DGG to moderate. And four, kind of building upon the last one. I'm just wondering if NASD is not expected to be strong in Q4 as Q3, maybe just because things have to pause a little bit as you bring new capacity on? Thank you.

Mike McMullen -- President and Chief Executive Officer

Yeah. So Doug, we've been waiting for this question. So thanks for putting it out there. And I'll start off, and then I'll have Bob share some of our guide lastly. So I really want to be really clear on this. We saw nothing unusual relative to pulling in from the fourth quarter. So our book-to-bill is solid and so there's nothing unusual happened in terms of change in the seasonality business by pulling in from Q4 into Q3. When we look at our LSAG business, we actually expected to decline in the Q4 of that tough compare. I think you're up 9% last year. And now there's two other parts, I only got two of the four parts. Yeah, I wrote some of it down. So Doug, I'll try to tag team with Mike.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

I'll try to take team with Mike. As Mike said, we didn't see any pull forward or any dynamic that took orders out of Q4 into Q3. And as he said, our backlog actually did not deteriorate. But that being said, you're seeing it, we saw it today, right, in the market, there is a tremendous amount of uncertainty, the trade resolution is nowhere. It's no closer now than it was when we -- we had our call back in Q2, and so we derisking Q4 a little bit relative to where we are. It is a tough comp in there. There is a little more uncertainty in the marketplace today than it was even three months ago. We're trying to be prudent there. That being said we raised the full year -- on the top line and certainly on the bottom line and we feel good about that.

To your question about NASD. We are expecting that growth to moderate. It had a very strong Q4 of last year. But when you look at the run rate, we still feel very good about the run rate. So it's less about level loading and manufacturing, and it's more about just comparables there, and we are expecting continue to performance in both ACG and DGG, not necessarily at the double-digit rate, that would be good, but that's not built into our guidance. As Mike said, we are expecting flattish to slight down in LSAG just given the strong 9% compare that we had in Q4 of last year.

Doug Schenkel -- Cowen and Company -- Analyst

Great. I think you hit them all. Thank you very much.

Mike McMullen -- President and Chief Executive Officer

Great. Thanks, Doug. Appreciate the question.

Operator

Your next question comes from Patrick Donnelly from Goldman Sachs.

Patrick Donnelly -- Goldman Sachs -- Analyst

Thanks guys. Maybe one on ACG for you, Mike. I'm sure Mark will chime in. But it was right there with the best growth you guys have ever put up in that segment even while facing a high single-digit comp. So how are you guys continuing to drive that segment to these levels of growth and it's been years since you have that initial refocus, how are we still seeing follow through, what's really driving the reacceleration?

Mike McMullen -- President and Chief Executive Officer

Yes. So I'll take the congratulations on behalf of Mark and then I'll pass it on to Mark. But you're exactly right. I can remember the early days, we were getting questions about when was this going to stop, and we said, why would it stop, because there's a number of things doing and there's also an expanding market under way. And as Mark pointed out, the strength was broad based across consumer services. I mean, we really think we're playing into and I tried to highlight this in my script that we're really playing into some real changing customer needs. They really want something that could help drive the productivity and they also looking for at times vendors to take on some of the work they've been doing inside.

And then on the consumables front, they really want these integrated workflows, but I can do the strategy a justice. So Mark, why don't you fill in the piece that I've missed.

Mark Doak -- Senior Vice President, Agilent President, Agilent CrossLab Group

Thanks, Mike, and hi Patrick. I guess, maybe it's a little bit of the past, but also the future, and we're still very bullish about our potential to grow, but some of the drivers made really significant investments in the spin -- expansion of our portfolios. And from services, we've got breadth now in more of a value-added services. And in the enterprise capabilities that will not only have a rollout over the continuation this year. And then in consumables business, that's an intentional drive to drive for more complete workflows, for targeted end markets and we called out biopharma in particular a high growth market where we've really been focused around grabbing that. So portfolio is a big driver. We're really getting some great results from expanding our reach and our ability to wallet share growth inside of our current accounts to our e-channel, e-subscriptions, still lot of opportunity there.

We still have a significant opportunity to improve our attachment rates to the Agilent instruments, but I always like to come back and remind everyone, we view our market not only as the Agilent install base, but also the competitions. And that adds a significant size and scale to the market opportunity and not only we can take market share from our competitions on the multi-vendor perspective we are. So kind of sum it up, a lot of work has been done over the past, build a lot of capabilities from the standpoint of portfolio, digital, working on some fundamental basics around what we can do in the attachment rate from the the sales channel and our big market opportunity out there. So hopefully I gives you a sense of where we've been a little bit, where we're going to.

Patrick Donnelly -- Goldman Sachs -- Analyst

Yes. Thanks for color. And then maybe just a quick one for Bob. On the share repurchase front, it was encouraging to see you guys step in and be opportunistic with the $550 million this quarter. How should we think about going forward? Obviously, the market has pulled back this amount, your stock along with it. So maybe just provide some perspective on that front?

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Yeah, we will. Thanks, Patrick, and I appreciate you acknowledging that. And we'll continue to evaluate the market, obviously, our focus is first on growth and will be closing the BioTek acquisition this quarter. And our M&A funnel continues to be strong and we will be looking at that, but not afraid to go into the market if the price is right, so to speak. So I think the way that we are looking at that is first on M&A and then looking to continue to deploy capital, where as I mentioned before, cash neutral right now with the acquisition of the BioTek, we will probably be at net debt of roughly one time. And so we still have a plenty of capacity there.

Patrick Donnelly -- Goldman Sachs -- Analyst

Okay. Thank you.

Operator

Your next question comes from Steve Willoughby from Cleveland Research.

Steve Willoughby -- Cleveland Research Company -- Analyst

Hi. Good evening.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Hi, Steve.

Steve Willoughby -- Cleveland Research Company -- Analyst

Most of my questions have been asked. Just two things for you, I guess. First, Mike, I was just wondering if you could comment a little bit more and provide any more color on some of the new products you've recently launched and how they're being accepted into the market, particularly the new GCs as well as the new iQ system. And then, I guess, secondly for Bob or Mike if you want to take it, are you able to quantify how much you're expecting in terms of revenue in the fourth quarter from the new NASD facility you're starting up here? Thanks guys.

Mike McMullen -- President and Chief Executive Officer

So if you don't mind, I'll make some summary comments and Jacob you can fill in some of the details. Last time when I saw a few on the -- on our new GC family launch was actually head of where we thought we'd be. And I think we're doing well on the iQ as well, but maybe you can kind of fill in some details there.

Jacob Thaysen -- Senior Vice President, Agilent President, Life Sciences and Applied Markets Group

Yes, certainly. I think we are -- despite some challenging market conditions, we're actually doing extremely well with the ADA series and in front of our -- on our own ramp to volume. So I think that this is working very well and it's really the combination of what we call the smart instrument combined with ours already proven -- well proven technology -- TC technology and that really resonates with our customers. And the same can actually be set with the -- with our iQ, which is of course a little -- only was introduced a few weeks ago at the ASMS and we start to ship here very soon. We have received the first orders. But what I can say there is that it has been very well received, where we have been out introducing it and presenting it to two customers, I think they very much like the ease of use, intuitiveness of the detector itself. And also, all the self-awareness that it have. So it really helps the customer to be successful, not only successful but also allow them to be have much more uptime in the laboratory.

And this really addresses the QA-QC labs, where it's all about being up time and of course, get things with the laboratory. So it's been very well received, but it's still early days for the iQ. So we have received orders, but we are shipping in this quarter here.

Mike McMullen -- President and Chief Executive Officer

And Bob, you want to -- do you want to take any questions here?

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Steve, just on NASD, you know it's going to be -- as we've said earlier in the year, it's not going to be material to the overall numbers. So it's going to be low single millions.

Operator

And we have time for one more question. The last question comes from Dan Brennan from UBS.

Dan Brennan -- UBS -- Analyst

Great. Thanks for taking the question and congrats on the quarter guys.

Mike McMullen -- President and Chief Executive Officer

Thanks, Dan.

Dan Brennan -- UBS -- Analyst

I was hoping to ask question back on -- hey, Mike. I was hoping to ask a question back to China. Can you just provide some color on, like what the actual generic business did in the quarter like what the level of revenues was in year-over-year? And then I appreciate, I think to take this question, you don't want to give a specific number for 2020, but just given, I think, the investors and ourselves are just trying to get some frame of reference like directionally, is there any help you can provide just as we go to 2020? I know you made a comment to take, but just a little more help if you could directionally on the Food and the China generic side how to think about that? Thank you.

Mike McMullen -- President and Chief Executive Officer

Yeah, so happy to -- let me take the second part of that question first, which is, when we think about the outlook for '20 again, we know I'm going to stay away from percentage changes in growth rates. But I think we have a lot more confidence around where the generic side of that marketplace is going, because we already have some proof points. We've already seen, which is -- the thesis was, in the second quarter, hey, we think this is going to lead to ultimately more business, but there was a pause in business. We actually saw that play out in the third quarter and we think it'll play out in the fourth quarter where the winners are going to be buying the equipment. We think the same thing is going to happen in Q2. I mean, excuse me FY '20 will be more in FY '20 event in terms of when it impacts the P&L, because we know what the process, we know what's going to happen, we know the winners, we have deep relationships with are going to invest.

So I think we have a level of confidence about where that market is going. I don't think the same thing can be said about the food market, because -- and that's why I used the word foreseeable future. What we do know is the the commercial side of that segment will continue to grow, that will continue to grow. It's unclear right now what's going to be happening relative to China's desire to invest in the government labs. As you heard from Jacob early, right now, they're prioritizing, for example, investments in environmental and that's why we're seeing strong environmental growth.

And Bob, maybe just work this kind of parse it out, I was just thinking, you know, how our business is and I can't give a specific number relative to generics, but this in terms of size of our pharma business in China and then roughly how much of it's in the non-biopharma side.

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Yeah. So our -- maybe just to comment on the food, Dan, on the -- you know, in Q4, as I said earlier, we're expecting it to be roughly about $40 million, which will be down year-on-year, pretty consistent with how we -- our results in Q2 and Q3. And the question is, over time, we do think that that business will come back not at the levels that had been in the past, just given the different dynamics. But the question is when, and we're not ready to call that yet.

On the pharma side, the business actually did better in Q3 than it did in Q2. And you know -- of roughly -- China is roughly 20% of the overall business and pharma is about 30% of that 20%, so it's about 6% overall, and it's roughly 50-50 in terms of consumables and instruments. So it's roughly 2% to 3% of our overall company. And in Q3, it grew, as Mike mentioned, really on the back of the winners of the 4 plus 7 and just kind of clarity on what this pilot meant going forward. So that's probably as much details we're going to get into relative to this and we'll have another quarter under our belt for Q4 and then be better prepared to talk about it as things unfold for the fiscal year next in November.

Dan Brennan -- UBS -- Analyst

Great. And if I could, since it is the last question, just one more. Mike, obviously a very strong quarter, you mentioned kind of similar to what you've been talking about, obviously, we could see what's going on with continued uncertainty around the marketplace, especially for, I think, cap equipment, and Bob you talk about PMIs. Any -- but you also talked about good book-to-bills and you had a good quarter. So anyway to help us think about like, as we try to tease out all the noise that's out there in the marketplace, kind of, what it means for Agilent on a go-forward basis like PMIs, do we want that? We pay a lot of influence that or just any more color about the customer conversations you're having and how it relates back to these comments? Thank you.

Mike McMullen -- President and Chief Executive Officer

Yeah, happy to do so. First thing I would do is, I would set aside 60% of the business of Agilent which is in recurring revenue side of the business and we talked a lot about the DGG business, ACG business in our view that you know we're going to have continued strength there. And then, what we've been trying to do is position the -- hey, listen, there is this 40% of the business which is instruments and that does is predicted by PMI. I think you may recall you I have a conversation, but I think still some of the model still hold which is the PMI trends do drive to some extent what's going to happen ultimately in the capital good side. I think we've already seen it.

PMI started dropping early this year, albeit, there are some areas of Jacob's business, which are still somewhat independent of that, whether it be the 4 plus 7 initiative, some policy changes, some of the things that happen in environmental, forensics. So I think it's sort of a -- it's a mixed model. So but -- first thing I do is start off by just saying, let's set aside 60% of the business over here and then start talking about the 40% and then parse out the cell analysis piece, which is -- which is by itself is a high-growing business driven by certain dynamics there and then parse out some of the policy driven stuff and then you're left with primarily chemical and energy exposure.

Bob, how would you think about that?

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Maybe I'll just leave it here. I mean, I think we feel very good about our portfolio. Obviously, we can't -- we can't time the markets from the standpoint of market growth, but we think that we are able to gain share in any market and I think this quarter proves that. Our portfolio is strong. We continue to invest in areas that are faster growing than the overall company, things like cell analysis and then also our biopharma businesses across all three business groups. So, I think, Mike mentioned it in the prepared remarks that the business is a lot different than it was five years ago and I think we continue to invest in fast-growing areas, continuing to transform it and make it a much more resilient model, and I think we feel good about that. Certainly for, not only Q4, but going forward.

Dan Brennan -- UBS -- Analyst

Great, thanks. Thanks again.

Ankur Dhingra -- Vice President of Investor Relations

All right. Thank you. With that, we will conclude today's earnings call. Thank you everyone for joining.

Operator

[Operator Closing Remarks].

Duration: 64 minutes

Call participants:

Ankur Dhingra -- Vice President of Investor Relations

Mike McMullen -- President and Chief Executive Officer

Robert W. McMahon -- Senior Vice President, Chief Financial Officer

Jacob Thaysen -- Senior Vice President, Agilent President, Life Sciences and Applied Markets Group

Sam Raha -- Senior Vice President, Agilent President, Diagnostics and Genomics Group

Mark Doak -- Senior Vice President, Agilent President, Agilent CrossLab Group

Derik de Bruin -- Bank of America Merrill Lynch -- Analyst

Ross Muken -- Evercore ISI -- Analyst

Tycho Peterson -- JP Morgan -- Analyst

Brandon Couillard -- Jefferies & Company -- Analyst

Puneet Souda -- SVB Leerink -- Analyst

Catherine Schulte -- Robert W. Baird -- Analyst

Doug Schenkel -- Cowen and Company -- Analyst

Patrick Donnelly -- Goldman Sachs -- Analyst

Steve Willoughby -- Cleveland Research Company -- Analyst

Dan Brennan -- UBS -- Analyst

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