Baxter International Inc.

Good morning, ladies and gentlemen, and welcome to the Baxter International second quarter 2021 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 phone. If anyone should require assistance during the conference, please press star, then zero on your touch-tone phone. As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be re-recorded or re-broadcast 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 of Investor Relations at Baxter International. Ms. Trackman, you may begin.

Good morning and welcome to our second quarter 2021 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 2021 financial results and full year 2021 financial outlook. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the third quarter and full year of 2021, new product development, 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 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. Now I'd like to turn the call over to Joe. Joe?

Thank you, Claire. Good morning, everyone, and thank you for joining us. I will begin with a review of Baxter's second quarter results and also share a few words about our upcoming investor conference. Jay will then provide a deeper dive on our financial performance and outlook. And we'll wrap up with Q&A. Baxter delivered second quarter sales growth of 14%, as reported, 9% on a constant currency basis and 8% operationally. Growth was driven primarily by the ongoing global recovery from the COVID-19 pandemic resulting in favorable performance comparisons for a number of our businesses versus the prior year, as the pandemic affected patient treatment dynamics and demand mix in the prior year. On the bottom line, second quarter adjusted earnings per share were 80 cents, up 25% year over year, and exceeding our original guidance. All three of our geographic segments contributed to the positive quarterly performance. The Americas and EMEA achieved high single-digit growth, and APAC achieved low double-digit growth, all at constant currency rates. While we are clearly experiencing recovery from the pandemic across all three of our geographies, the situation on the ground varies considerably by market. As always, we salute the healthcare workers who continue to face enormous challenges every day on the front lines of care. I also want to express my personal gratitude to all the Baxter employees who tirelessly support these clinicians. and caregivers while helping to ensure we address the needs of patients across our vast, life-sustaining portfolio. Turning to our performance by business, five of our seven product categories achieved growth on a constant currency basis. Performance was led by biopharma solutions and advanced surgery, which delivered 49% and 48% constant currency growth, respectively. Growth in BPS was fueled by contracts to assist in the manufacture of COVID-19 vaccines. Advanced surgery growth reflects a favorable comparison to the prior year spurred by improving surgical volumes as pandemic recovery advances globally. As you saw in this morning's press release, we are building on our momentum in advanced surgery with the acquisition of Perclot polysaccharide hemostatic system. Perclot marks our entry into the global hemostatic powder segment, which will allow us to serve surgeons and their patients with an even broader range of options to control intraoperative bleeding across active and passive solutions. Our medication delivery business grew 12%, a constant currency rate, also benefiting from a favorable comparison, driven by improving rates of admissions at hospitals as compared to the prior year. Looking ahead, medication delivery is continuing to position for the U.S. launch of our novel IQ infusion platform, including those IQ safety software in our IQ Enterprise digital connectivity suite. Following up on our recent FDA resubmission, we're now in the process of responding to an additional information request from the agency. We continue to expect to launch NovumIQ in the U.S. before the end of the year. Our clinical nutrition category advanced single digits at constant currency rates, reflecting ongoing strength in the U.S. Pharmaceuticals also grew at single digits constant currency, adjusting for the recent Calix and Doxil acquisition pharmaceuticals was flat year over year. Although we expect competitive pressures to continue in this marketplace, we remain focused on launching molecules with differentiated presentations and or complex formulations. We have several projected launches of new generic injectables in the coming years that will help to fuel growth in this business and mitigate some of the competitive pressures we are experiencing. Performance in renal care was comparable to the prior year at constant rates, with growth in the U.S. offset by a decline across international markets. On a global basis, the market continues to be dampened by the impact of the pandemic, which has contributed to a higher mortality rate for patients with kidney disease, combined with a slowing of new patient diagnosis. As we said last quarter, we expect the recovery of this market to continue, returning to its pre-COVID dynamics over the next one to two years. In this quarter, we start returning to positive year-over-year PD patient growth globally, including mid-single-digit PD patient growth in the U.S. The pandemic has highlighted the vital importance of the home dialysis therapy option, and as a leader and recognized innovator in this space, it has never been more urgent to support education, awareness, and access. Our Global Safer at Home campaign, which has been underway for more than a year, is dedicated to helping clinicians, patients, and other stakeholders learn more about the benefits of home care, particularly amid pandemic conditions. Lastly, performance in acute therapies declined mid-single digits at constant currency rates year over year. This decline was expected given the extremely challenging comparison following last year's historic surge in demand for continuous ring replacement therapy in light of the pandemic. We remain excited by the prospects for the advanced treatment options in the CRRT market. In fact, Q2 marked the launch of Prisma X2, the latest version of our NextGen platform for CRRT and organ support with embedded TrueView digital health technology. From an ESG perspective, earlier this month, we announced our 2030 corporate responsibility commitment, which will help to drive Baxter's environmental, social, and governance efforts over the next decade and beyond. This work is integral to how we advance our mission to save and sustain lives and serve all of our stakeholders, from patients and clinicians to our communities and investors. Our 2030 commitment is built around the three overarching objectives, empower our patients, protect our planet, and champion our people and communities. Full details can be found in our 2020 Corporate Responsibility Report, now posted on Baxter.com. Briefly looking ahead, we continue operating in an environment of some uncertainty. We fully anticipate the broader trend of pandemic recovery to sustain, but geographic disparities and emerging variants could slow or undermine the pace. Also, just like our healthcare peers and countless other companies, Baxter is subject to the impact of inflation and the rising cost of freight, fuel, and other raw materials and commodities. We will continue to look for opportunities to offset the impact from these incremental expenses. As I wrap up, I want to highlight that our 2021 investor conference will be held on Monday, September 20, in Deerfield, Illinois. At the conference, we plan to focus on our key strategic objectives to enhance growth and drive innovation. In addition, as a critical part of our ongoing business transformation, Jim Borzis, Senior Vice President and Chief Supply Chain Officer, will outline the next phase of our manufacturing supply chain journey, which is expected to enhance our operational effectiveness. drive margin improvement. Now, I'll pass it to Jay, who will share a closer look at our results and our outlook for the balance of the year.