Baxter International Inc.

Thank you for standing by. Good morning. Welcome to Baxter's International Third Quarter 2021 Earnings Conference Call. Your lines will remain in a listen-only mode until the question and answer segment of today's call. At this time, if you would like to ask a question, you will need to press star, then the number one on your touchtone phone. If anyone should require assistance during the conference, please press star then zero on your touchtone phone. As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast 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 Trackland, Vice President, Investor Relations at Baxter International. Ms. Trackman, you may begin.

Good morning and welcome to our third quarter 2021 earnings conference call. Joining me today are Joel Maida, 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 2021 financial results and fourth quarter 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 fourth quarter and full year 2021, the pending acquisition of Hillerom, 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 the call. As usual, I will begin with an overview of Baxter's third quarter performance. Jay will take a closer look at the financials and outlook for the rest of the year. Then we'll close with your questions. Clearly, the most notable highlight from the quarter is last month's announcement of our agreement to acquire HillROM, subject to the approval of HillROM shareholders and other customary closing conditions. I recently made site visits to select HillROM locations as part of our integration planning process, and I was joined by other members of our senior leadership team, meeting face-to-face with HillROM's dedicated employees entering the facilities only underscored our confidence and enthusiasm for the proposed acquisition of Hiram. Upon closing of the transaction, we plan to bring a broader array of products and services to patients and clinicians across the care continuum and around the world. We are focused on identifying opportunities to further accelerate innovation to address the rapidly evolving needs of our customers. The teams are working diligently on plans to bring together these two complementary portfolios to deliver enhanced value for our stakeholders. We look forward to updating you on these acceleration opportunities following the close of the deal. Earlier this month, the Hartz IV Rodino, or HSR, waiting period in the U.S. expired with no of a second request by the FTC. While the FTC reserves its right to take further action, this is a key milestone to clear the way for a successful closing. We are in the process of securing all remaining global regulatory approvals required for closing, and the Hill-Rom shareholder meeting to vote on the transaction is currently scheduled for December 2nd. In addition, our integration planning management office is up and running with teams from both organizations preparing for a swift, effective combination once the deal closes. We will expect to close by early 2022. Moving on to the third quarter financial performance, I'm pleased to report solid ongoing momentum as we make our way toward the close of the fiscal year. Baxter delivered third quarter sales growth of 9% on a reported basis, 7% at a constant currency, and 6% operationally. Like last quarter, growth was impacted by the continuing, if somewhat erratic, pace of COVID-19 pandemic recovery. While the pandemic still represented a headwind to top-line sales in the quarter, the magnitude of this headwind has continued to decline, reflecting the improved rate of hospital admissions in the U.S., as well as ongoing pandemic recovery in international markets. This resulted in a favorable comparison to the same period last year. On the bottom line, third quarter adjusted earnings per share were $1.02, up 23%, and exceeded our third quarter guidance. Positive mix and disciplined expense management drove the favorability. As you saw in our earnings release, all of our geographic segments and product categories contributed to the positive performance in the quarter. The pace of pandemic recovery continues to vary by both therapeutic and geographic market. Our broad global footprint and diverse portfolio of essential products combine to help mitigate the variability and shore up the strength of our overall enterprise. We also benefit from our resilience and agility, which have been greatly enhanced through our ongoing transformation. Looking at performance by business, growth was led by biopharma solutions, which advanced 45% at constant currency rates. Performance was driven by revenues related to our manufacturing of multiple COVID-19 vaccines. Medication delivery grew at 11% constant currency, reflecting the improved rate of U.S. hospital admissions a new infusion pump contract with a large health system in the U.S. and increased demand for Baxter's small volume parenterals. With respect to our Novum IQ 510 case submission, we are continuing to work with the FDA to address their questions on our submission. While we hope to receive clearance by the end of this year, it is possible it may shift into early 2022. In pharmaceuticals, 7% constant currency growth reflects the benefit of our acquisition of specified rights outside the U.S. to Calix and Doxil. Adjusting results for the acquisition, operational growth rose 1%. Year-over-year growth in the quarter reflects lower U.S. sales in part due to a large pandemic-related government order received in Q3 2020 and softness in inhaled anesthesia. This challenging comparison was offset by strong growth internationally, driven by our pharmacy compounding business. Our third quarter launch of premixed norepinephrine was met with strong demand, part of an increasing trend as hospital pharmacies embrace premixed formulated drugs and other products that improve efficiency, particularly in the wake of the pandemic. This is a key strength of our pharma portfolio and we plan to continue launching more molecules with differentiated presentations or complex formulations in the months to come. During the quarter, advanced surgery performance in the U.S. was affected by lower surgical volumes, which remain depressed versus pre-pandemic rates. Procedure volumes were unfavorable to our prior expectations as hospitals delayed elective procedures in light of the Delta variant. This was more than offset by growth in the international markets, which could slowly recover from the effects of the pandemic. Growth in clinical nutrition reflected the benefit of our new product launches, particularly in international markets. Acute therapies continues to perform very well. A year-over-year decline in U.S. sales reflects a difficult comparison in the face of last year's surge in demand for continuous renal replacement, or CRRT, products. Again, this was offset by international growth. As an outcome of the pandemic, we now have many more CRRT devices in the field, as well as heightened engagement and utilization on the part of clinicians, creating a platform for sustained momentum. Growth in renal care was driven by our home-based peritoneal dialysis, or PD, products globally. As I have mentioned on past calls, demand does continue to be dampened amid the the pandemic due to higher mortality rates for patients with kidney disease and a slowdown in new patient diagnosis. We expect the ESRD market to gradually recover to pre-COVID growth rates over the next one to two years. Our Renal Care Teams Global Safer at Home campaign is dedicated to helping clinicians, patients, and other stakeholders learn more about the benefits of home-based PV care, especially in the context of today's pandemic conditions. From an ESG perspective, I'm pleased to highlight a new partnership between UNICEF USA and the Baxter International Foundation to improve access to safe water in La Guajira, Colombia, one of the country's most water-challenged regions. A $1.5 million foundation grant is helping fund the multifaceted three-year program. This quarter, we're also honored to be included on Forbes' latest list of the world's best employers and America's best employers for women. In addition, we're recognized as a leading organization on Surmount's Inclusion Index. Looking forward, we continue to navigate with some uncertainty on the horizon. The overall trajectory of pandemic recovery appears more clear, but the new geographic contours remain inconsistent. New variants may take an unknown toll on our business and our employees, and we will continue to contend with the effects of macroeconomic issues. Related to this last point, we are not immune to inflationary pressures and the rising cost of raw materials, commodities, components, fuel, and ongoing supply chain disruptions. While we are actively working to address these rapidly rising costs, we recognize these factors may continue to impact our operations into 2022. Amid these challenges, we are on pace for a strong close to the year. This translates into momentum as we get set to execute on the vast potential of our proposed Hill Realm acquisition and launch the next phase of our transformation journey, fueled by the commitment of our outstanding global team. Now I will pass it to Jay for a closer look at our financial results and outlook.