Baxter International Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 Baxter International Earnings Conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Claire Trackman, you may begin.

Thank you. Good morning and welcome to our third quarter 2020 earnings conference call. Joining me today are Joelle Neda, 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 third 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 developments, business development, and regulatory matters, contain forward-looking statements that involve 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 could cause actual results to differ materially. In addition, on today's call, non-GAAP financial measures will be used to help investors understand Baxter's 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 Seprafilm, which closed on February 14th of this year. Now I'd like to turn the call over to Joe. Joe?

Thank you, Claire, and thank you to everyone joining us on the call. I hope that you and your families remain healthy and safe. I will begin with a quick review of Baxter's third quarter performance. Jay will provide more detail on the financials. Then we will wrap up with your questions. I want to start again by acknowledging all of the healthcare providers, first responders, researchers, and personal caregivers who are rising to enormous challenges every day in the ongoing fight against COVID-19. And, as always, I want to express my deepest appreciation to Baxter's employees who are navigating these unprecedented times in the unwavering spirit of our mission to save and sustain lives. Just as COVID-19 continues to impact all of our daily lives, it naturally also influences the trajectory of Baxter's operations and performance. During the third quarter, all three of our geographic regions observed sequential improvement in both hospital admissions and surgical procedures, but volumes remain below pre-COVID levels. For the third quarter, we estimate that hospital admissions and surgical procedures in the U.S. declined low double digits and mid single digits, respectively. Jay will discuss our 2020 outlook in more detail, but this guidance assumes volumes remain at these levels throughout the fourth quarter. Turning to our results, Baxter delivered third-quarter sales growth of 4% at constant currency rates and 3% operationally. On the bottom line, adjusted earnings per share were $0.83, up 12% year over year. All three of our global regions contributed to positive performance for the quarter. Growth was led by Asia Pacific, which was up 7% at constant currency rates, reflecting the geography's global leading virus containment and recovery to date, as well as our portfolio mix in the region. Five of Baxter's six global business units also delivered positive constant currency sales growth in Q3. Among them, acute therapies grew 35% year over year, adjusting for FX. This business continues to experience heightened demand for its continuous renal replacement therapy, or CRRT, products in the midst of the pandemic. In Q3, Baxter was granted U.S. FDA emergency use authorizations for our RegioSET replacement solution. Select sets to help address increased demand for CRRT supply and treatment options. This quarter, we also announced a distribution agreement with BioMirie for the NefroClear CCL14 diagnostic test, currently in development for use assessing the risk of developing persistent severe acute kidney injury. RenoCare delivered mid-single-digit growth at constant currency rates for the quarter. driven by continued demand for our portfolio of peritoneal dialysis products. Pandemic conditions continue to underscore the advantages of home-based PD treatment as well as Baxter's ShareSource remote monitoring technology for both clinicians and patients. Late in Q3, CMS announced the finalization of the end-stage renal disease treatment choices payment model, a core component of the Advancing American Kidney Health Initiative. This is a key step forward in increasing U.S. adoption of home-based dialysis care, and Baxter stands prepared to support patients and healthcare providers as the new model takes effect in 2021. Also during the quarter, Baxter received FDA de novo authorization for our third nova dialyzer for expanded hemodialysis or HDX therapy. We have a TPNIS add-on payment application pending with CMS for this novel renal care technology and expect an update when the final rule is published in November. While at this time we're not going to speculate on CMS' final determination, we continue to believe in the benefits this product offers ESRD patients. Among our GVUs, clinical nutrition achieved constant currency mid-single-digit growth. Performance here reflects sustained demand, new product introductions, and the impact of a competitive supply issue in the U.S. Last month, we announced FDA approval of new higher protein formulations of Clinimix and Clinimix E for parenteral nutrition. These offerings further expand the diversity of our U.S. nutrition portfolio, offering physicians new options and flexibility to meet their patients' needs. Advanced surgery grew 9% at a constant currency rate bolstered by our February acquisition of Ceprofilm. Adjusting for the acquisition as well as FX, advanced surgery declined mid-single digits operationally, in line with the lower rate of surgical procedures as compared to the prior year period. On a constant currency basis, pharmaceuticals increased low single digits and medication delivery declined low single digits. Performance in both businesses reflect lower rates of emergency room utilization and associated hospital admissions for a range of acute and chronic conditions. In medication delivery, we remain optimistic about our Novum IQ smart infusion pump technology. We are making progress addressing the open questions from FDA on the Novum IQ 510K applications and remain on track to update the submissions within the next three months. We are working collaboratively with the agency and currently expect to launch the pumps in the U.S. next year. In Canada, the Novum IQ large volume pump was recently approved, and we hope to receive approval for the syringe pump in the fourth quarter. And finally, we anticipate obtaining CE mark for the entire Novum IQ platform by the end of this year. By now, it goes without saying that we are operating in a largely unpredictable environment. We are experiencing an unfortunate resurgence of COVID-19 in many geographies, which resonates across the broader treatment landscape. Baxter continues to respond with a sustained focus on efficiency and effectiveness, which has become second nature across the enterprise. Our strategic emphasis on medically essential products and our broad geographic footprint reinforce the underlying stability of our business model. We remain focused on advancing innovation as a critical growth driver and are actively evaluating opportunities to augment this performance through strategic capital deployment, including business development and opportunistic share repurchases. Despite today's challenges and unknowns, I remain confident in Baxter's trajectory and potential. We are reigniting a legacy of innovation, building upon our leadership in corporate responsibility, and implementing new racial justice efforts that are rooted in our long-time emphasis on inclusion and diversity. By executing across all dimensions, we will deliver enhanced value and make a meaningful impact for all stakeholders we serve over the long term. Now I will pass it to Jay for his comments on the quarter and our outlook for the remainder of the year.