The operator welcomes participants to BD's Third Quarter Fiscal 2024 Earnings Conference Call, which is being recorded and will be available for replay. Greg Rodetis introduces the call and mentions that Tom Polen and Chris DelOrefice will be leading the call, along with segment presidents Mike Garrison and Rick Byrd. Forward-looking statements will be made and comparisons will be on a year-over-year basis. Reconciliations between GAAP and non-GAAP measures can be found in the appendices of the earnings release and presentation.

The company recorded accruals due to recent developments regarding Italian government medical device payback legislation, but they are presenting adjusted revenues excluding these impacts. The company's BD 2025 strategy is making excellent progress, with mid-single-digit organic revenue growth and strong execution despite market dynamics and macro factors. The company's BD Excellence operating system is driving momentum and allowing for raised earnings guidance. The company's strategy consists of driving growth through innovation and tuck-in M&A, simplifying through BD Excellence, and empowering the organization. The company also provides updates on the Critical Care acquisition.

The company is making progress towards a successful acquisition and is excited to welcome the new team. The addition of Critical Care will advance their connected care strategy and contribute to their growth. The connected medication management strategy is also performing well, with a record number of Alaris pumps shipped in the quarter. The company is at the forefront of using AI, automation, and robotics to improve healthcare processes and plans to increase their business in this area with the acquisition of Critical Care. This will also create opportunities to combine AI-driven monitoring with infusion technologies to simplify nursing workflow and improve patient care.

In the future, health care process automation and informatics AI is expected to become a $7 billion business, while the PureWick platform is expected to reach $1 billion in revenue by 2030. The recent launch of PureWick Flex has received positive feedback and is expected to continue driving growth. BD Biosciences is also seeing growth in immune health and oncology, with new technologies and products being launched. The combination of these innovations has already been used in a groundbreaking 50-color flow cytometry experiment.

The company remains focused on the immune health and oncology space, and sees significant growth potential in biologics drug delivery, particularly in GLP-1s. They have a strong track record of partnerships with biologic drug approvals and are well-positioned to capitalize on this trend. They also have contracts with multiple novel GLP-1 therapies and are actively supporting biosimilars. In addition, they are working with customers to develop next-generation biologics for various conditions.

BD is developing wearable injectors to support the delivery of complex molecules and proteins, which are expected to be a future trend in the market. They are also implementing a simplification strategy called BD Excellence, which involves improving product quality and reliability through Kaizen events and reducing their manufacturing network by 20%. They are also investing in smart factories to further improve manufacturing productivity.

In the third quarter, the company saw strong performance across multiple areas despite temporary market and macroeconomic factors. This was driven by successful execution of their simplification programs, resulting in above-market organic revenue growth and margin expansion. The company also exceeded their goals for earnings and cash flow. Revenue grew 5.2% organically, with over 90% of revenue in their top three regions growing by 6% or more. This was partially offset by a decrease in China due to ongoing market dynamics.

The growth of BD Medical was driven by MMS, with exceptional performance in infusion systems and broad volume growth and share gains in MDS consumables. Pharm Systems also had strong growth in prefilled devices for biologic drugs, but was offset by transitory market dynamics. BD Life Sciences saw strong growth in specimen management, but lower market demand for instruments affected growth in biosciences. BD Interventional had strong organic growth, led by UCC and Surgery, with continued momentum in PureWick and conversion to bioresorbable Phasix technology. BDI also had strong growth in peripheral intervention, but a decrease in oncology due to market dynamics in China.

In the third quarter, the company saw significant improvement in margins and operating income, driven by productivity and cost improvement initiatives. The adjusted diluted EPS exceeded expectations and the company's cash flow and capital allocation were also strong. Year-to-date free cash flow increased significantly and the company remains focused on improving cash flow conversion. Net leverage improved and the company is confident in meeting its fiscal year '24 guidance.

The company is focused on driving momentum and share gains across their portfolio, including Alaris. They have revised their organic revenue growth guidance to 5% to 5.25% for the full year, but have raised their adjusted diluted EPS guidance range to $13.05 to $13.15. They are confident in achieving their adjusted operating margin guidance of over 50 basis points improvement, and expect margin acceleration in Q4. Looking ahead to fiscal year '25, they are confident in delivering strong performance and exceeding their 25% adjusted operating margin goal with double-digit EPS growth. They believe 10% EPS growth would be a good starting point for fiscal year '25. Overall, they are confident in delivering another year of strong growth and overdelivering on their margin expectations.

The company is on track to exceed its full year margin improvement goals and deliver another year of double-digit free cash flow growth. They have seen positive momentum and remain well positioned to continue delivering on their value creation objectives. The first question in the Q&A session is about the guidance for the fourth quarter, which implies 6.5% organic growth and strong operating margins. The company is pleased with their performance in the third quarter, with strong share gains and volume performance. They are outperforming their competitors in markets that are undergoing transitory dynamics. The company is confident in their competitive position and their ability to rebound in these markets.

The company is pleased with their differentiated share gains in new molecules and biosimilar spaces. They expect continued growth in these areas as well as in China in Q3. Q4 guidance is expected to be in the upper 6% range, driven by the continued momentum of Alaris and a favorable comp from last year. The rest of the portfolio is assumed to have similar performance. Gross margin is expected to remain strong, as it has already been factored into the cost base.

The company is expecting to see a natural leverage in their operating margin, leading to strong performance in fiscal year 2025. They are confident in their strategy and portfolio, which has allowed them to see growth despite challenging market dynamics. The majority of the margin growth in 2025 will come from gross margin, and the third quarter of this year can be used as a reference for the expected performance in 2025.

The company is optimistic about its margins and excited about its Critical Care line. They are anticipating some headwinds from Pillar 2, but are confident they can absorb them. The company expects to see low-end growth of 10% on a reported basis, with a modest FX headwind. They have also activated cash flow hedges to help solidify their performance. The revenue guide was lowered due to challenges in China's biosciences and pharma markets, but the company remains confident in its overall performance.

The speaker explains that they are not expecting a turnaround in certain markets in the fourth quarter, but they are confident in their ability to compete and perform well. They mention the impact of economic and political factors in China, but still expect growth in their bioscience sector. They also decline to give specific revenue guidance for next year.

The speaker cannot provide specific guidance on recovery timing, but they are confident in delivering strong performance despite transitory market dynamics. The company has seen mid-single-digit growth despite challenges in the Pharm Systems and life science research sectors. The impact of these challenges is greater than the benefit from Alaris. However, the company is outperforming these markets and expects to see improvement in FY '25.

The company's portfolio is performing well, with strong growth in areas like MDS and specimen management. The company is also making progress in its strategy for health care automation and AI informatics, with Alaris back in its connected medication management portfolio and a backlog of orders. Other areas of the connected care portfolio, such as pharmacy and laboratory automation, are also expected to do well. The company is also launching new products like PureWick for different care settings.

The company expects strong growth in the chronic disease management space and double-digit biologics growth in Pharm Systems in 2025. They also anticipate a lift in vaccine and anti-coag sales as destocking alleviates. Biosciences has been flat, but the market has been down and peers are also experiencing declines. However, the company is seeing some positive signs, such as an increase in instrument purchases and grant approvals from the NIH. They expect more clarity on China's stimulus plans in the future. In terms of capital allocation, the company will address this in their November call.

The company is seeing strong growth in their Medical Management Solutions (MMS) business, with a focus on consumables, IV sets, and interoperability solutions. They have also taken market share in their Alaris product and are launching a next-generation Pyxis platform in the back half of the year. Additionally, they are addressing customer needs in the pharmacy automation space, where they are market leaders.

The company has a strong innovation strategy with 10 new releases planned for the connected med management portfolio next year, including the Pyxis launch. They have also acquired MedKeeper and MedBank to expand into less acute environments. Growth in this market is cyclical, but the company has a strong service model and flexible financing options. They have also become the largest pharmacy automation robotics company in the world, with high customer interest and double-digit growth. A change in tax incentives in Europe caused a slowdown, but the order book is picking up in both the U.S. and Europe.

The speaker discusses the strength of fundamentals in various sectors such as labor efficiency, safety, and the use of technology in healthcare, retail, and long-term care. They mention the success of Alaris and the strong resonance of their connected net management strategy with customers. In response to a question about the P&L for next year, they mention that macro factors and high market share will contribute to growth, but also highlight the company's efforts to differentiate itself and achieve a 25% operating margin by FY '25. They expect operating expenses to remain flat and anticipate over 100 basis points of improvement.

The majority of the growth seen in the company is due to improved gross margins, which will allow for reinvestment in R&D and business building. The BD Excellence program has been successful in driving continuous improvement and reducing waste, resulting in improved line productivity. This will also lead to natural leverage and further investment in global business services.

The company is experiencing strong cash flow performance due to productivity improvements and the consolidation of manufacturing plants. This will continue to drive margin growth in 2025, as the company invests in smart factory technology and digitization. The company plans to focus on margin growth in the future and will provide more information at their upcoming Investor Day in 2025.

Patrick Wood asks about the impact of China on the market and whether there have been any structural changes. Tom Polen responds by stating that they have a strong team in China and continue to invest in the market. VBP [ph] has been playing out as expected, with volumes in MDS China increasing. The lower research funding is a transitory dynamic, and they expect the market to ultimately recover. Other factors, such as biosciences and pricing pressure, are also related to the current market conditions in China.

The speaker discusses the economic challenges in China and how they are affecting their business. They mention that they expect these challenges to be temporary and that they are still investing in the market. The speaker also answers a question about the projected sales for Alaris and mentions that they expect a more balanced margin rhythm in the upcoming year.

The company has executed well in terms of margins and is expecting a more balanced phasing in the future. The launch of Alaris in the second half of the year will lead to smoother performance in the next fiscal year. The company is not giving guidance for individual product lines for 2024, but is expecting to at least reach the $100 million historical run rate. The fiscal '25 guide includes Critical Care and implies that other areas may not grow as quickly. The company is being cautious in their initial commentary.

During a conference call, Chris DelOrefice, the Chief Financial Officer of BD, addressed a question about the company's goal of achieving a 25% operating margin by 2025. He clarified that the margin improvement is coming from the gross margin, rather than the Critical Care division. DelOrefice also mentioned that external estimates for the company's growth are currently just under 9%, but BD hopes to exceed this and is well positioned to do so. The last question on the call came from Vijay Kumar, who asked about potential destocking issues in the pharma industry. DelOrefice responded that while some of their peers have mentioned a bottoming out of destocking, BD is still cautious about the first half of 2025 due to headwinds in biosciences and potential VBP issues in China.

The company is performing well in the bioscience and Pharm Systems markets due to their innovative technologies. They expect to continue outperforming the market and see growth in biologics, particularly in the area of GLP-1s. They also have a strong position with new GLP-1s in the pipeline. The company expects to benefit from the market recovery in the future.

The company has signed agreements for biosimilar GLP-1s and expects to see launches in the next 12 months. They are also seeing destocking in the anticoagulant and vaccine segment, but expect growth to return to normal in the back half of the next fiscal year. The company has taken a conservative stance on China's market recovery and does not expect a significant decline in MDS next year.

The speaker, Tom Polen, thanks investors for joining the call and highlights the company's strong growth and increased earnings guidance. He also mentions opportunities for growth in the future and the addition of the Critical Care team to BD. The call will reconvene in November.

This summary was generated with AI and may contain some inaccuracies.