Baxter International Inc.

Good morning, ladies and gentlemen, and welcome to Baxter International's second quarter 2020 earnings conference call. Your lines will remain in a listen-only mode until the question and answer segment of today's call. At that time, if you have a question, you'll need to press star, then the one key on your touch-tone telephone. If anyone should require operator assistance during the conference, please press star zero on your touch-tone telephone. As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcasted without Baxter's permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Ms. Claire Trackman, Vice President in Investor Relations at Baxter International. Ms. Trackman, you may begin.

Thanks, Katherine. Good morning and welcome to our second quarter 2020 earnings conference call. Joining me today are Joe Almeida, Baxter's Chairman and Chief Executive Officer, and Jay Saccaro, Baxter's Chief Financial Officer. On the call this morning, we will be discussing Baxter's second quarter 2020 financial results and full year 2020 financial outlook. A supplemental presentation to complement this morning's discussion can be accessed on our website in the Investor section under Events and News. This presentation includes related non-GAAP reconciliations. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for full year 2020, new product development, business development, and regulatory matters contain forward-looking statements, then about risks and uncertainties. And of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our SEC filings for more detail concerning factors that can cause actual results to differ materially. In addition, on today's call, non-GAAP financial measures will be used to help investors understand factors ongoing business performance. A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in our earnings release issued this morning and available on our website. On the call this morning, we will be discussing operational sales growth, which adjusts for the impact of foreign exchange and the acquisition of separate films, which closed on February 14th of this year. Now I'd like to turn the call over to Joe. Joe?

Thank you, Claire, and thanks, everyone, for joining us today. I hope that you and your families are healthy and safe. Like last quarter, I want to begin by recognizing all of the healthcare providers and the first responders who continue to work tirelessly in combating COVID-19. Our deep appreciation also goes to all the clinicians and researchers who are advancing knowledge, treatment, and promising vaccine candidates to address this global pandemic. Three months ago, we were hoping to see some easing in the trajectory of this deadly pandemic by now. Sadly, while the hotspots may have shifted, the infection rates and impact remain staggering. Baxter's second quarter performance reflects the evolving impact of pandemic conditions on the global healthcare landscape and on our own operations. As you saw in today's press release, Baxter reported a year-over-year decline in both net sales and earnings in Q2 2020. While demand for certain pandemic-related treatments and technologies reached historic highs within the quarter, we also saw a negative impact on our results from significantly lower rates of hospital admissions and a reduction in elective procedures. The implementation of various shelter-in-place initiatives globally, as well as patient concerns regarding potential COVID-19 infection risk in the healthcare setting contributed to these trends. During the quarter, we continued to experience significantly heightened demand for our acute therapies products due to COVID-19. According to a number of third-party sources, 20 to 30% of COVID-19 ICU patients will develop acute kidney injuries requiring treatment with a renal replacement therapy, of which continuous renal replacement therapy or CRRT is the preferred option. In addition, our chronic renal care business continues to deliver sustained mid-single-digit constant currency growth in peritoneal dialysis product portfolio. We continue to highlight the advantages of peritoneal dialysis therapies, plus our shared source telehealth technology as clinicians and patients look to home-based treatment to limit the risks of potential pandemic exposure. This positive performance in acute therapies and renal care, as well as growth in our clinical nutrition business, partially sets year-over-year sales declines in medication delivery, pharmaceuticals, and advanced surgery. Results for these businesses reflect the negative impact in the quarter resulting from a decline in U.S. hospital admissions of over 20% and a reduction in U.S. surgical volumes of more than 30%. The rate of these declines was similar to what we observed in both our European, primarily Western Europe, and Latin American markets during the quarter. Our Asia-Pacific business, particularly our business in China, slowly began to recover in the second quarter. While we do expect sequential improvement in both admissions and elective procedures globally, our current assumption is that both metrics will remain below prior year levels and could be further negatively impacted by COVID resurgences in markets around the world. Sales in the second quarter also reflected a pull forward of demand into the first quarter, where we saw generally more aggressive ordering and stocking patterns among hospitals and distributors, reflecting elevated uncertainty amid the pandemic's early rapid global spread. While the current environment remains deeply uncertain, as of the end of the second quarter, we have been able to renormalize production and inventory of high-demand products and have reduced the need for round-the-clock manufacturing. We also have been able to wind down our use of supplemental expedited shipping methods, which played an essential role in accelerating product availability early in the pandemic. Baxter's resilience at this unprecedented moment continues to be bolstered by the diversity and medically essential nature of our products, combined with our market leading positions. Similarly, our broad geographic footprint supports balance and stability, helping counter the risks of overexposure to a more limited range of geographies. The continuing momentum of our business transformation also helps to strengthen our market position. Baxter's enhanced efficiency, speed, and agility are clearly helping us navigate the impact of COVID-19. And that is just one variable we're addressing. As we anticipate a challenging hurricane season, we're leveraging our learnings on enhanced operational effectiveness for maintaining steady supply as the season unfolds. Meanwhile, we remain steadfastly focused on driving growth through innovation. Recent weeks have seen the launch of our new Evo IQ syringe infusion system in the UK and Australia. FDA clearance of our alpha-4-shaped bioactive bone graft, and the publication of new positive data in the journal CHEST involving our Starlink fluid management monitoring system. Looking ahead, additional pipeline highlights include our Novum IQE Smart Pump technology, share source analytics, and additional differentiated generic injectables. In all of these efforts, our people remain our ultimate resource and differentiating strength. I'm working closely with some of the most talented and dedicated colleagues I have known. Our customer satisfaction rates as recently captured in the highest average net promoting scores Baxter has recorded globally further speak to our efforts during this period. This team has helped advance dramatic change and will continue to do so. This includes new initiatives to advance racial justice within Baxter and among the communities and markets we serve. I'm proud of what we have achieved to date across our business and our culture. But even more importantly, I'm energized by our ability to address various markets' challenges and accomplish still more for our patients shareholders, employees, and the diverse communities we serve. Now, I will pass it to Jay for a closer look at our second quarter results and outlook for the balance of the year.