Baxter International Inc.

Good morning, ladies and gentlemen, and welcome to Baxter International's first quarter 2022 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 will need to press the star 1 key on your touchtone phone. If anyone should require assistance during the conference, please press star 0. 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 Trackman, Vice President, Investor Relations at Baxter International. Ms. Trackman, you may begin.

Good morning, and welcome to our first quarter 2022 earnings conference call. Joining me today are Joel Nava, Baxter's Chairman and Chief Executive Officer, Jay Saccaro, Baxter's Chief Financial Officer, Giuseppe Iacoli, Baxter's Chief Operating Officer, and Jim Borzi, Baxter's Chief Supply Chain Officer. On the call this morning, we will be discussing Baxter's first quarter 2022 financial results and full year financial outlook for 2022. On the call this morning, we will be discussing Baxter's first quarter 2022 financial results and full year financial outlook for 2022. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlets for the second quarter and full year 2022, the recent acquisition of Hillrom, new product development, business development, and regulatory matters, including ones related to the 510K review of the Novum IQ infusion platform, 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 in our SEC filing 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 FACTA'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 Hillrond. Before I turn the call over to Joe, I wanted to let everyone know that the registration link for our 2022 Investor Conference, which is being held on Wednesday, May 25th in Glenview, Illinois, is now available on our website. Please visit the Investor Relations section of Factor's website to register for the event. With that, I'll now turn the call over to Joe. Joe?

Thank you, Claire. Good morning, everyone, and thank you for joining today's call. I'll get started with an overview of first quarter performance trajectory and a quick preview of what you can expect our upcoming investor conference in May. Jay will take a closer look at our financials as well as our outlook for the current quarter and balance of the year. Then we'll close with your questions. As you know, first quarter 2022 represents our first full quarter since the close of Hill-ROM acquisition. I'm pleased to report solid results for the combined company on both the top and bottom line, reflecting the ongoing momentum of legacy Backstreet businesses, as well as the early promise and potential of our Hill-ROM integration. First quarter sales were 26% on a reported basis and 29% at a constant currency, with legacy Hiram sales contributing $755 million to our total $3.7 billion in reported sales for the quarter. Excluding the impact of Hiram and foreign exchange, first quarter sales rose 3% on an operational basis. On the bottom line, adjusted earnings per share of $0.93 increased 22%, exceeding our guidance of $0.79 to $0.82. Performance in the quarter reflects the contribution from Hiram. First quarter performance continued to reflect the ongoing erratic impact of the COVID-19 pandemic. which fuel demand in some of our businesses while dragging on performance in others. As ever, the diversity and durability of our portfolio, in combination with our global footprint, act as buffers that help us weather the extremes, and these factors are only bolstered with the added scope and opportunity created through the addition of HealROM. We continue to see solid demand across both legacy Baxter and here on businesses. We are still experiencing pockets of back orders and backlogs due to the significant supply chain challenges that have made it increasingly difficult at times to access a range of raw materials and components, particularly electromechanical components. Similarly, we continue to experience increased inflationary pressures and rising freight costs, which have only intensified in the wake of the war between Ukraine and Russia. Our focus on efficiency and discipline expense management has gone a long way to partially offset these challenges. And I'm proud of our integrated supply chain team for its strategic moves in procurement and logistics. They're helping us meet the needs of patients and clinicians while helping to support sustained value and growth of our shareholders. Taking a deeper dive by business, performance was led by biopharma solutions, which advanced 21% at constant rates. This was driven by a favorable year-over-year comparison related to revenues from the manufacture of multiple COVID-19 vaccines. Our medication delivery business increased 10% accounts and rates, driven by growth in IV therapies. As you saw in this morning's release, we shared a status update on our Novum IQ large volume infusion pump with those IQ safety software. which has been under review by FDA. We received a letter from the agency last Friday with a request for additional information. As a result, the 510K review window has been placed on hold so that our team can address accordingly. The team currently plans to respond to FDA within the calendar year. We remain on track to submit responses on the Novum IQ syringe pump filing to FDA in the second quarter of 2022. I want to emphasize why we can't speak for FDA or the eventual outcome of their review process. We are confident in our leading-edge NovoMyQ technology. We are committed to responding to FDA's request and to bringing the benefits of NovoMyQ to patients and clinicians in the U.S. and beyond. Advanced surgery performance was up 8% at constant rates during by year-over-year improvement in the rate of surgical procedures, following depressed rates due to the pandemic. Renal care rose 1% at constant currency rates with a mid-single-digit growth in the U.S., partially offset by a low single-digit decline internationally. Growth in the quarter was driven by global demand for our home peritoneal dialysis products, partially offset by lower sales of dialysis internationally. As we have discussed previously, PD patient demand has been constrained due to the pandemic during factors, including higher mortality rates for kidney disease patients, and the lower rate of new patient diagnosis. We remain confident of renewed uptake in pediatric therapy over the upcoming years, as well as in the health and lifestyle factors that make home-based therapy a compelling choice for patients and clinicians. Clinical nutrition also grew 1% at constant currency, reflecting improving demand for selected parenteral nutrition products. Growth in the quarter was dampened by ongoing supply constraints for vitamins globally. Pharmaceuticals declined 2% at constant currency, reflecting continued increased competitive activity for certain U.S. generics, as well as the impact of supply constraints that impacted production volumes during the quarter. We continue to focus on launching new molecules in complex formulations as well as embracing our international growth opportunities to help accelerate performance in the business moving forward. Finally, among our legacy business, acute therapies declined 7%, a constant currency, reflecting a challenging year-over-year comparison. due to the last year's surging demand for continuous renal replacement therapy, or CRRT, products amid the pandemic. Underlying performance in this product category continues to build momentum, with the pandemic only further highlighting the vital role of CRRT products in the ICU. As I stated earlier, our newly acquired Heron businesses contributed $755 million to sales in the quarter. Our global integration is proceeding on course, and we are starting to seize on key opportunities to expand global access to our growing portfolio, as well as uniting our capabilities to expand our presence in connected care. Looking ahead, I want to note that our original outlook for 2022 did not anticipate the tragic outbreak of a war in Ukraine. The conflict is partially disrupting our ability to serve patients locally, although we are working hard to serve Ukrainian patients and refugees directly and through our humanitarian aid partners. We are also, like many other companies, assessing our profile in Russia, although as a healthcare company, there are certain life-sustaining products that we are continuing to make available to patients in line with current sanctions. The conflict has also caused a ripple effect across the supply chain network globally, resulting in rising oil prices, which we expect to negatively impact freight, material, and utility costs this year. In addition, given the current timeline anticipated for Novo MyQ, we have made the decision to remove any related sales contribution in 2022. These factors, coupled with ongoing increased inflationary pressures, have resulted in adjustments to our guidance for the balance of the year, as Jay will review in a moment. Our teams are working diligently to find potential offsets to these increased expenses. And as we mentioned last quarter, we have identified opportunities where it may be possible to pass through some of these costs in select geographies. While the global macroeconomic landscape continues to present unique challenges, we are nonetheless excited about our overall prospects, momentum, and capacity to make a difference for our many stakeholders. We look forward to giving your deeper insights on our trajectory next month at our 2022 Investor Conference. We will share a broader look at our growth in connected care as well as our commitment to ongoing therapeutic innovation. We will also provide more detail on how expanded global access and uncompromising portfolio management should contribute to profitable growth. In addition, we will highlight the rapid evolution of our integrated supply chain function as we work to address today's operational challenges head on and continue to evolve for the future. You'll see Baxter's Healthcare Innovations firsthand at our interactive innovation hall. And as always, we'll be including plenty of time for your questions and informal networking with our senior leadership team. I look forward to seeing many of you in person, and the event will also be webcast for online viewing. Now I will pass it to Jay, who will take a closer look at our first quarter results and 22 outlook.